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The 

Massachusetts 

Income  Tax 


17  COURT  STREET 
Temple  Place  BOSTON  222  Boylston  St. 


O  i^iiCh 


■■CIA.TIOK 

a'  TRJOAyURI.JR. 


Officers 


Chairman  Board  of  Directors 
GORDON  ABBOTT 

Vice-Chairman  Board  of  Directors 
FRANCIS  R.  HART 

PHILIP  STOCKTON,  President 
WALLACE  B.  DONHAM,  Vice-President 
JAMES  C.  HOWE,  Vice-President 
S.  PARKMAN  SHAW,  Jr.,  Secretary 


BANKING  DEPARTMENTS 

Main  Office 
GEORGE  W.  GRANT,  Vice-President 

LLEWELLYN  D.  SEAVER,  Cashier 

Temple  Place  Branch 
FRED  M.  LAMSON,  Vice-President 

ARTHUR  Y.  MITCHELL,  Manager 

Bay  State  Branch 
FREDERICK  J.  BRADLEE,  Actuary 

CURTIS  CmPMAN,  Manager 

Loan  and  Credit  Department 
JAMES  C.  HOWE,  Vice-President 

FREDERIC  G.  POUSLANB,  Vice-President 

WILBUR  W.  HIGGINS,  Treasurer 

Bond  Department 
WALTER  F.  WYETH,  Vice-President 

LAURENCE  H.  PARKHURST,  Manager 


SPECIAL  DEPARTMENTS 

JULIUS  R.  WAKEFIELD,  Vice-President 

CHESTER  B.  HUMPHREY,  Vice-President 

Trust  Department 
FERDINAND  M.  HOLMES,  Trust  Officer 

Corporation  Department 
CHARLES  B.  WETHERBEE,  Manager 

Transfer  Department 
HOWARD  W.  BURGE,  Manager 

Safe  Deposit  Vaults 
RICHARD  POPE,  Manager 


STUART  W.  WEBB,  Vice-President 

JOSEPH  G.  STEARNS,  Vice-President 


The 

Massachusetts 

Income  Tax 


QU  @onjyf^t  ||pi)mm| 


BOSTON 


The  informaiion  in  this  book  is  believed  to  be 
accurate,  bvi  many  details  of  interpretation  must 
of  necessity  await  the  regulations  of  the  Tax  Com- 
missioner as  large  discretionary  powers  in  the 
enforcement  of  the  law  are  vested  in  him. 


^=;:o^ 


Copyright,  1916 
By  Old  Colont  Tbubt  Company 


THE  ONIVBBSITr  PBBSS 
CAUBBIDGBj  UAS8. 


THE  MASSACHUSETTS 
INCOME  TAX 

THE  new  Massachusetts  Income  Tax 
law  makes  it  possible  for  the  first 
time  for  trustees  and  investors  to 
buy  taxable  securities  of  a  high  grade, 
such  as  first-class  railroad  bonds  and 
other  sound  investment  securities,  and  at 
the  same  time  to  comply  with  the  tax  re- 
quirements of  the  commonwealth.  For 
example,  while  such  securities  were  taxed 
under  the  old  property  tax  the  average 
rate  throughout  the  state  was  in  the 
neighborhood  of  $20  on  the  thousand. 
This  tax  deducted  from  the  income  of  a 
43^%  bond  purchased  at  par  left  a  net 
return  of  only  23/^%.  The  purchase  of 
such  a  bond  therefore  became  out  of  the 
question  for  either  trustees  or  individuals 
who  made  their  tax  returns.  Under  the 
new  income  tax  such  a  bond  will  net 
4.23%,  while  a  5%  bond,  bought  at  par, 
will  net  4.70%.  This  opens  up  the  whole 
field  of  conservative  bonds  to  trustees 
and  investors  at  reasonable  and  attrac- 
tive rates  of  return.  The  state  will  at  the 
same  time  benefit  from  the  new  revenue 
which  it  will  receive  from  its  share  of  the 
income. 

This  change  is  particularly  important 
in  its  effect  on  trusts  and  estates,  because 
the  main  objects  of  the  creator  of  a  trust 
are,  first  —  conservative  investment,  and 
second  —  a  reasonable  return  to  his  bene- 
ficiaries. It  has  been  in  the  past  exceed- 
ingly diflScult  for  a  trustee  who  made  his 
returns  for  tax  purposes,  as  the  Old 
Colony  Trust  Company  is  required  by 
law  to  do,  to  meet  both  these  objects. 
Similarly,  it  has  been  exceedingly  diffi- 
cult for  the  Bond  Department  of  the  Old 
Colony  Trust  Company  to  furnish  to  its 
customers  who  made  returns  for  tax  pur- 
poses conservative  securities  which  yield 
a  satisfactory  net  income.  These  diffi- 
culties disappear  under  the  operation  of 
the  new  law. 

At  the  same  time  such  security  holders 
as  object  to  the  drastic  sworn  returns  re- 
quired by  the  act  will  continue  to  invest 

355989 


in  Massachusetts  corporation  stocks  and 
real  estate  mortgages.  This  may  be  ex- 
pected to  maintain  the  present  advanta- 
geous position  in  the  market  of  our  local 
securities,  particularly  as  the  income  of 
such  securities  will  not  be  subject  to  the 
new  tax. 

The  law  is  both  clear  and  obviously 
proper  that  no  trustee  shall  make  a  profit 
out  of  his  trust  by  selling  securities  owned 
by  him  to  his  trust  or  by  buying  for  him- 
self securities  from  his  trust.  The  Bond 
Department  and  the  Trust  Department 
of  the  Old  Colony  Trust  Company  are 
conducted  with  scrupulous  regard  to  this 
legal  situation.  The  buying  and  selling 
ability  of  the  Bond  Department  is  never- 
theless placed  fully  at  the  disposition  of 
the  Trust  Department.  In  this  way  the 
beneficiaries  of  the  Trust  Department 
secure,  without  any  profit  being  charged 
against  them,  the  benefit  of  the  assistance 
of  specialists  in  this  important  phase  of 
the  investment  problem. 

We  have  included  in  this  book  an 
article  by  Professor  Charles  J.  Bullock, 
Chairman  of  the  Department  of  Eco- 
nomics of  Harvard  University,  containing 
an  able  discussion  of  the  more  important 
principles  and  features  of  the  act,  which 
we  are  confident  will  be  found  both  in- 
teresting and  useful. 

Letters  of  inquiry  and  personal  calls 
relating  to  any  of  these  topics  are  par- 
ticularly invited  by  the  officers  of  the 
company. 

Old  Colony  Trust  Company. 


THE  MASSACHUSETTS  INCOME 
TAX 

By  CHARLES  J.  BULLOCK 

The  income  tax  enacted  in  1916  marks  an 
epoch  in  the  history  of  taxation  in  Massachu- 
setts. For  nearly  three  hundred  years,  as 
colony,  province,  and  state,  Massachusetts  has 
raised  the  bulk  of  her  public  revenues  from  the 
general  property  tax.  Changes  in  the  details 
of  the  tax  laws  have  been  made  from  time  to 
time.  Corporation  taxes  were  introduced  dur- 
ing the  Civil  War,  and  recent  years  have 
brought  the  tax  upon  inheritances.  But  most  of 
our  public  revenues  continued  to  be  raised  by 
a  tax  levied  uniformly  upon  real  and  personal 
property  by  the  several  cities  and  towns  at 
whatever  rates  might  be  needed  to  meet  local 
expenses. 

This  method  of  taxing  property,  as  every- 
one knows,  has  not  worked  well.  Prior  to  the 
Civil  War,  when  public  expenditures  were  small 
and  a  tax  of  $4  or  $5  per  $1000  sufficed  to  meet 
all  public  charges,  the  system  gave  little  reason 
for  complaint,  and  taxation  was  not  a  "problem" 
in  Massachusetts.  But  between  1850  and  1870 
the  rapid  growth  of  cities  and  the  heavy  outlays 
during  the  Civil  War  led  to  an  unprecedented 
increase  of  public  expenditures,  by  which  the 
rate  of  taxation  was  increased  to  $15  or  $16 
per  $1000.  Under  the  strain  of  these  heavy  tax 
rates,  the  old  system  of  uniform  taxation  of  real 
and  personal  property  at  varying  local  rates 
completely  broke  down.  Our  tax  laws  should 
have  been  thoroughly  overhauled  forty  years 
ago;  but  this  proved  impossible,  and  conditions 
steadily  went  from  bad  to  worse  until  at  length 
they  became  absolutely  intolerable. 

The  first  evil  result  of  the  laws  was  their 
tendency  to  drive  personal  property  out  of  the 
cities  and  towns  where  rates  were  high  into  a 
small  number  of  favored  localities  where  tax 
rates  were  low  and  the  assessors  extended  a 
cordial  welcome  to  wealthy  immigrants.  This 
at  first  attracted  little  attention;  but  when  at 
length  it  produced  conditions  imder  which  some 
localities  were  able  to  live  luxuriously  upon  a  $3 
tax  rate  while  others  could  not  provide  for  press- 
ing necessities  with  a  tax  rate  of  $20  or  $25,  it 
was  seen  to  be  an  intolerable  evil.  In  1865,  in 
the  state  at  large,  the  revenue  derived  from 
taxes  on  personal  property  and  from  corpora- 
tion taxes  distributed  to  the  cities  and  towns, 
amounted  to  $5.81  per  capita;  while  in  the 
fourteen  wealthiest  towns  it  amounted  to  $6.87 
per  capita,  or  slightly  more  than  the  average 


6  THE  MASSACHUSETTS 

for  the  entire  commonwealth.  But  in  1915, 
after  the  process  of  concentration  had  contin- 
ued for  fifty  years,  the  revenue  derived  from 
the  stated  sources  by  the  average  city  or  town 
amounted  to  no  more  than  $7.54  per  capita; 
while  in  the  fourteen  wealthiest  towns,  it  had 
risen  to  $29.50  per  capita.  Conditions  like  these 
are  almost  unique  in  the  history  of  taxation, 
and  they  have  been  a  potent  argument  for  such 
reform  of  our  taxation  laws  as  should  put  an 
end  to  the  concentration  of  taxable  property  in 
a  handful  of  wealthy  towns. 

A  second  great  evil  has  been  the  creation  of 
an  artificial  demand  for  so-called  "non-taxable" 
investments,  such  as  the  shares  of  Massachu- 
setts corporations.  While  the  average  security 
owner  has  paid  little  attention  to  our  taxation 
laws  and  has  exercised  freedom  of  investment, 
trustees  and  some  other  investors  have  been 
unable  to  enjoy  such  freedom.  Our  taxation 
laws  have  compelled  them  to  invest  largely  or 
wholly  in  non-taxables,  with  the  result  that  as 
a  rule  they  have  been  unable  to  purchase  bonds, 
and  have  been  obliged  to  invest  in  real  estate, 
mortgages,  and  shares  of  Massachusetts  cor- 
porations. For  a  long  time,  this  was  commonly 
regarded  as  a  good  thing,  because  it  was  thought 
to  encourage  investment  in  Massachusetts  en- 
terprises. But  in  time  it  came  to  be  realized 
that  in  proportion  as  the  market  for  non-tax-. 
ables  became  artificial,  investors  who  did  not 
need  to  consider  the  tax  laws  avoided  this  class 
of  investments.  It  also  happened  that  this 
artificial  demand  for  tax-exempt  securities 
created  an  artificial  supply  by  bringing  into 
existence  a  large  number  of  non-taxable  preferred 
stocks.  Many  of  these  stocks  have  been  dis- 
tributed by  conservative  bankers  after  careful 
investigation  and  are  well-secured  and  proper 
investments,  but  as  was  inevitable  in  such  a 
situation,  some  of  the  new  securities  were  of 
doubtful  solidity.  Of  course  the  issue  of  any  in- 
secure tax-exempt  stock  is  not  to  the  advantage 
of  the  large  number  of  conservative  and  well- 
managed  Massachusetts  corporations.  One  of  the 
greatest  advantages  of  the  new  income  tax  is 
that  it  will  tend  to  restore  normal  conditions 
in  the  local  investment  market,  and  will  permit 
an  important  class  of  investors  to  enjoy  freedom 
of  investment  for  the  first  time  in  a  generation. 
At  the  same  time  Massachusetts  securities  will 
retain  the  advantage  of  tax  exemption,  and  this 
will  be  the  more  important  because  the  income 
of  other  securities  must  in  the  future  be  returned 
for  taxation. 


INCOME  TAX 


A  final  evil  of  the  tax  laws  was  that  they  were 
tending  more  and  more  to  drive  property  out  of 
Massachusetts.  So  long  as  they  merely  drove 
property  from  one  town  to  another,  the  state  at 
large  might  view  the  movement  with  compara- 
tive indifference.  But  when  it  came  to  actual 
removals  of  property,  amounting  to  tens  of  mil- 
lions, the  state  could  not  be  indifferent  to  what 
was  going  on,  and  reform  of  the  tax  laws  could 
not  be  longer  deferred. 

Since  the  taxation  of  intangible  property  was 
the  worst  feature  of  the  system,  it  was  inevitable 
that  the  first  step  should  be  to  provide  a  better 
method  of  dealing  with  this  class  of  property.  In 
1907  the  so-called  "three-mill  tax"  was  pro- 
posed by  a  special  commission  upon  taxation. 
This  meant  a  flat  tax  at  the  rate  of  three  mills 
upon  each  dollar  of  the  assessed  valuation  of 
money,  credits,  and  securities.  Since  it  would 
have  been  moderate  in  amount,  it  could  have 
been  collected  with  tolerable  certainty  and  with- 
out danger  of  driving  taxpayers  from  Massachu- 
setts; and  since  the  rate  would  have  been  the 
same  in  every  city  and  town,  it  would  have  put  a 
stop  to  intra-state  migration.  But  the  plan  en- 
countered constitutional  difficulties  which  proved 
insuperable,  and  therefore  came  to  nothing. 

In  1911  Governor  Foss  broached  the  subject 
of  a  state  income  tax  which  should  be  introduced 
as  a  substitute,  complete  or  partial,  for  the  ex- 
isting tax  on  personal  property.  Since  it  was 
then  evident  that  there  was  likely  to  be  a  federal 
income  tax  before  very  long,  the  plan  of  a  state 
income  tax  was  received  with  general  favor,  be- 
cause it  was  seen  that,  if  taxpayers  were  obliged 
to  return  their  incomes  for  taxation  by  the  federal 
government,  there  would  be  an  obvious  con- 
venience and  economy  in  adopting  similar 
methods  in  state  taxation.  Differences  concern- 
ing the  precise  form  of  an  amendment  to  the 
state  constitution  permitting  the  establishment 
of  a  uniform  income  tax,  delayed  for  several 
years  the  adoption  of  such  an  amendment.  But 
in  1915  an  income  tax  amendment  was  at  last 
submitted  to  the  voters,  who  ratified  it  by  an 
overwhelming  majority,  and  a  way  was  thus 
opened  for  the  long-deferred  and  greatly  needed 
reform  of  the  tax  laws  of  Massachusetts. 

The  legislature  of  1915  authorized  the  ap- 
pointment of  a  special  commission  to  investigate 
"  the  necessity  and  advisability  of  changes  in  ex- 
isting tax  laws";  and  anticipating  the  adoption 
of  the  proposed  constitutional  amendment,  in- 
structed the  commission  to  draft  a  law  "pro- 
viding for  the  taxation  of  incomes."    After  the 


8  THE  MASSACHUSETTS 

amendment  was  ratified  at  the  polls,  this  com- 
mission took  up  the  subject  of  the  income  tax, 
and  in  January  submitted  to  the  Legislature  the 
draft  of  a  well-considered  law  imposing:  (a)  a 
tax  of  6%  upon  income  derived  by  inhabitants 
of  Massachusetts  from  such  forms  of  intangible 
property  as  were  taxable  under  the  existing  law; 
and  (6)  a  tax  of  1J^%  upon  income  derived  from 
annuities,  trades,  and  professions. 

This  measure  was  well  received  by  the  public, 
and  after  careful  consideration  by  the  legislative 
committee  on  taxation  was  finally  enacted  into 
law.  Apart  from  perfecting  amendments,  the 
only  important  change  made  in  the  draft  sub- 
mitted by  the  special  taxation  commission  was 
the  insertion  of  a  new  provision  imposing  a  tax 
of  3%  upon  profits  derived  from  dealings  in 
intangible  personal  property. 

Upon  the  whole  the  proposed  income  tax  law 
encountered  surprisingly  little  opposition.  In 
the  House  there  were  not  enough  dissenters  to 
secure  a  roll  call.  The  responsibility  is  now 
shifted  from  the  Legislature  to  the  taxpayers  who 
in  1917  will  come  under  the  operation  of  the  act. 

Turning  now  to  the  new  law,  we  find  that  it 
imposes  what  may  be  called  a  "partial"  as  dis- 
tinct from  a  "general"  income  tax.  It  does  not 
bring  all  kinds  of  income  within  its  net,  but  con- 
fines itself  to  incomes  derived  from  three  sources : 
(a)  intangible  personal  property,  (b)  annuities, 
trades,  and  professions,  and  (c)  speculative  deal- 
ings in  intangible  personal  property. 

It  is,  therefore,  much  narrower  in  scope  than 
the  federal  income  tax  which  applies  to  income 
from  nearly  all  sources,  and  somewhat  narrower 
than  the  Wisconsin  income  tax  which  reaches 
most  kinds  of  income  but  does  not  apply  to 
dividends  from  some  classes  of  corporations. 
The  Massachusetts  law,  however,  follows  what 
is  undoubtedly  the  line  of  least  resistance  in  this 
state.  Our  problem  has  been  that  of  substitut- 
ing an  income  tax  for  such  parts  of  our  present 
system  of  property  taxation  as  had  proved  ab- 
solutely unsatisfactory.  There  was  no  popular 
demand  for  a  new  method  of  taxing  real  estate  or 
tangible  personal  property,  and  the  Legislature 
acted  wisely,  therefore,  in  making  the  income  tax 
merely  a  logical  complement  to  a  system  of  prop- 
erty taxes  upon  tangible  property,  real  and  per- 
sonal. The  result  is  a  perfectly  logical  adjust- 
ment by  which  tangible  things  like  real  estate, 
machinery,  merchandise,  and  livestock  are  as- 
sessed locally  upon  their  capital  value,  while 
intangibles  are  assessed  by  the  state  upon  their 
annual  income. 


INCOME  TAX  9 

The  Massachusetts  income  tax  is  imposed 
upon  "inhabitants"  of  the  commonwealth. 
The  word  "inhabitant"  had  long  been  used  in 
our  tax  laws,  and  its  precise  meaning  had  often 
been  considered  by  the  Supreme  Court.  By  re- 
taining it,  the  new  act  probably  works  no  change 
in  the  taxable  status  of  persons  except  by  aban- 
doning the  old  practice  of  making  April  1st  the 
legal  tax  day,  and  providing  that  every  person 
who  is  an  inhabitant  of  the  commonwealth  at 
any  time  between  the  first  day  of  January  and 
the  thirtieth  day  of  June  shall  be  liable  to  the 
income  tax.  Presumably  the  retention  of  the 
word  "inhabitant"  will  relieve  from  taxation 
persons  temporarily  domiciled  in  Massachusetts; 
but  it  is  evident  also  that  the  substitution  of  a 
six  months'  period  for  the  single  date  of  April 
1st  will  make  it  diflBcult  for  actual  inhabitants 
to  evade  the  tax. 

The  most  important  provision  of  the  income 
tax  act  is  that  which  abolishes  the  existing  tax 
upon  intangible  property  and  substitutes  there- 
for a  uniform  tax,  at  the  rate  of  six  per  cent, 
upon  the  income  derived  therefrom.  Since  this 
will  be  levied  at  the  same  rate  in  every  city  and 
town,  our  tax  laws  will  hereafter  offer  no  in- 
ducement to  changes  in  domicile;  and  since  the 
amount  of  the  tax  is  reasonable,  it  will  undoubt- 
edly be  paid  cheerfully  by  the  taxpayers.  To 
the  investing  public,  the  law  should  bring  a 
profound  sense  of  relief  in  that  it  substitutes  a 
definite  and  reasonable  tax  for  an  uncertain  and 
unequal  system,  under  which  many  escaped 
altogether,  some  compounded  with  the  local 
authorities  for  a  reasonable  rate  of  taxation, 
and  still  others  paid  one-quarter  or  one-third 
of  their  entire  incomes.  While  taxation  can 
hardly  be  expected  to  be  popular,  it  can  be  re- 
spected as  necessary  and  just.  The  old  law 
relating  to  intangible  property  was  neither  of 
these  things,  and  was  entitled  to  little  respect; 
but  the  new  law  may  be  confidently  expected  to 
command  both  the  respect  and  the  approval  of 
the  people  of  Massachusetts. 

The  next  feature  of  the  tax  on  the  income 
from  intangible  property  is  that  it  applies  only 
to  such  kinds  of  intangibles  as  were  subject  to 
taxation  under  the  former  law.  Thus  the  status 
of  mortgages  upon  taxable  Massachusetts  real 
estate  is  in  no  wise  affected,  since  the  income  of 
such  mortgages  is  exempted  from  the  income 
tax.  Similarly,  income  from  deposits  in  savings 
banks,  income  from  tax-exempt  state  and  mu- 
nicipal bonds,  and  dividends  received  from  stock 
of    Massachusetts    corporations    and    national 


10  THE  MASSACHUSETTS 

banks  are  all  exempt  from  income  tax.  The  same 
is  true  of  income  from  the  stock  of  the  so-called 
"real  estate  trusts,"  and  of  income  from  the 
shares  of  such  voluntary  associations  as  hold 
the  shares  of  Massachusetts  corporations  or  are 
conducting  their  business  principally  in  Massa- 
chusetts and  are  therefore  already  sufficiently 
taxed.  In  general,  the  owner  of  securities  will 
find  that  he  is  taxable  only  upon  income  derived 
from  sources  that  were  taxable  under  the  old 
law.  About  the  only  exception  to  this  state- 
ment is  found  in  the  case  of  trusts  or  other  vol- 
untary associations  not  owning  real  estate  ex- 
clusively, or  shares  in  Massachusetts  corpora- 
tions, and  not  doing  business  principally  in 
Massachusetts.  Such  concerns  are  treated  under 
the  new  law  as  foreign  corporations,  and  divi- 
dends derived  from  their  shares  will  hereafter  be 
subject  to  taxation. 

Another  very  important  feature  of  the  tax  on 
intangibles  is  that  it  provides  for  a  deduction 
or  offset  on  account  of  indebtedness.  The  for- 
mer law  only  permitted  the  taxpayer  to  offset 
debts  against  credits,  —  that  is,  it  allowed  the 
taxpayer  to  deduct  money  that  he  owed  from 
money  that  was  owed  to  him,  —  and  the  result 
was  that  most  classes  of  intangible  property 
were  taxable  without  any  offset  or  allowance. 
The  new  law  does  not  indeed  permit  the  deduc- 
tion of  interest  paid  upon  any  and  all  debts 
from  the  income  received  by  the  taxpayer  from 
taxable  intangible  property.  To  do  so  would 
have  been  wrong  in  principle  and  would  have 
opened  the  door  to  wholesale  evasion.  Deduc- 
tion of  all  debts  from  taxable  income  is  neces- 
sary as  well  as  proper  under  a  general  income 
tax  applicable  to  income  from  all  sources,  but 
under  a  partial  income  tax  it  is  manifestly  im- 
possible. The  new  law,  therefore,  follows  what 
may  be  called  the  principle  of  granting  the  tax- 
payer a  proportional  offset  or  deduction.  It 
provides  in  effect  that,  from  the  income  received 
from  taxable  intangible  property,  the  taxpayer 
may  deduct  such  a  proportion  of  the  interest 
paid  on  his  total  indebtedness  as  the  income 
which  he  derives  from  taxable  intangible  prop- 
erty bears  to  his  total  income  from  all  sources. 

The  provisions  of  the  law  at  this  point  are 
necessarily  complicated,  but  their  practical 
operation  may  be  shown  by  the  three  following 
cases:  a  person  receiving  $99,000  of  income  from 
taxable  intangible  property  and  $1000  of  in- 
come from  other  sources  may  deduct  from  his 
taxable  income  derived  from  intangible  property 
99%  of  the  interest  paid  upon  his  indebtedness; 


INCOME  TAX  11 

a  person  receiving  $50,000  of  income  from  tax- 
able intangibles,  and  $50,000  from  other  sources 
will  be  able  to  deduct  one-half  of  the  interest 
which  he  pays  upon  his  debts;  and  finally,  a 
person  receiving  $1000  from  taxable  intangible 
property  and  $99,000  from  other  sources  will  be 
permitted  to  deduct  but  1%  of  the  interest  upon 
his  obligations.  These  cases  do  not  take  account 
of  all  the  provisions  of  the  law  and  are  intended 
merely  to  illustrate  the  principle  which  is  emi- 
nently fair  and  in  practice  should  offer  no  serious 
difficulties. 

Besides  allowing  deduction  for  debts,  the  new 
law  grants  an  exemption  of  $300  of  income  from 
taxable  intangible  property  to  persons  whose 
total  income  from  all  sources  does  not  exceed 
$600  during  the  year  prior  to  the  assessment  of 
the  tax.  Under  the  old  law  a  person  owning  any 
amount  of  taxable  securities  was  liable  to  taxa- 
tion, and  in  many  cases  of  small  estates  un- 
covered in  the  Probate  Courts  great  hardship 
arose.  The  statutes,  indeed,  provided  that  the 
assessors  might  exempt  the  polls  and  any  por- 
tion of  the  estates  of  persons  who  by  reason  of 
age,  infirmity,  or  poverty  were  deemed  to  be 
unable  to  contribute  toward  the  public  charities. 
But  this  did  not  meet  the  needs  of  the  case, 
since  a  person  with  a  capital  of  five  or  ten  thou- 
sand dollars  was  not  in  a  position  to  plead 
"poverty."  Thus  it  came  about  that  persons 
deriving  small  incomes  from  taxable  property 
were  frequently  taxed  for  twenty  or  twenty-five 
per  cent  of  such  incomes.  The  new  law  not 
only  reduces  the  rate  of  taxation  to  six  per  cent 
of  the  income  from  intangibles,  but  provides  an 
exemption  of  $300. 

A  final  feature  of  the  act  is  its  provision  con- 
cerning the  taxable  situs  of  property  held  in 
trust.  Hitherto  the  policy  of  the  common- 
wealth has  been  to  tax  beneficiaries  who  reside 
in  Massachusetts,  no  matter  where  the  trustee 
resides  or  may  have  derived  his  appointment, 
and  then  to  tax  trustees  who  are  inhabitants  of 
the  commonwealth,  even  though  some  or  all  of 
the  beneficiaries  of  the  trust  reside  in  other 
states.  In  some  cases  a  provision  was  made  for 
avoiding  double  taxation,  but  in  general  the 
law  proceeded  upon  the  principle  of  "Heads  I 
win,  tails  you  lose,"  and  reflected  no  credit  upon 
the  commonwealth.  The  new  act  provides 
that  the  taxes  levied  upon  income  shall  be  gov- 
erned by  the  domicile  of  the  beneficiary  and  not 
by  that  of  the  trustee.  Under  it  persons  who 
are  inhabitants  of  Massachusetts  and  receive 
income  from  taxable  property  held  in  trust  will 


12  THE  MASSACHUSETTS 

be  taxed  upon  that  income  whether  or  not  the 
trustee  is  a  resident  of  the  commonwealth;  and, 
upon  the  other  hand,  if  the  beneficiary  of  the 
trust  lives  in  another  state,  no  tax  will  be  im- 
posed upon  a  trustee  who  happens  to  live  in 
Massachusetts.  This  is  a  matter  of  simple  jus- 
tice, and  it  will  have  the  effect  of  making  it 
possible  for  inhabitants  of  Massachusetts  to  act 
as  trustees  under  many  trusts  that  otherwise 
would  never  come  to  this  state. 

Since  the  new  law  is  intended  to  be  strictly 
enforced,  it  necessarily  requires  compulsory  re- 
turns of  taxable  income.  On  or  before  the  first 
day  of  March  in  each  year  the  inhabitants  of 
Massachusetts  must  hereafter  make  returns  of 
their  income  from  taxable  intangible  property. 
Such  returns  must  be  made  under  oath,  and 
failure  to  comply  with  the  law  will  make  a  person 
liable  to  heavy  penalties.  No  option  is  given  to 
taxpayers,  as  under  the  former  statutes  of  the 
commonwealth;  and  we  now  have  an  absolute 
requirement  of  full  returns  of  taxable  income, 
with  which  no  careful  lawyer  or  responsible 
banker  will  advise  his  client  or  customer  to  trifle. 
But  these  returns  are  not  to  be  made  to  the  local 
assessors.  The  law  provides  that  they  may  be 
filed  with  the  tax  commissioner  in  Boston  or 
with  a  special  income  tax  assessor  appointed  to 
assess  incomes  in  the  district  where  the  taxpayer 
lives.  It  is  expressly  provided  that  the  tax- 
payer may  elect  whether  to  send  the  return  to  the 
tax  commissioner  or  to  the  income  tax  assessor, 
so  that  the  requirement  of  a  sworn  return  does 
not  mean  that  the  details  of  a  taxpayer's  affairs 
are  to  become  known  to  the  people  of  his  neigh- 
borhood. The  act  also  provides  that  neither  the 
tax  commissioner  nor  any  deputy,  assistant, 
clerk,  or  other  public  employee  shall  disclose  to 
any  unauthorized  person  "any  information 
whatever  contained  in  or  set  forth  by  any  such 
return,  other  than  the  name  and  address  of  the 
person  filing  it." 

As  indicated  in  the  last  paragraph,  the  admin- 
istration of  the  income  tax  is  placed  in  the  hands 
of  the  state  tax  commissioner.  This  is  one  of  the 
wisest  provisions  of  the  law  because  it  is  vitally 
important  that  the  act  shall  be  uniformly  ad- 
ministered without  fear  of  favor  by  intelligent 
administrators  in  every  part  of  the  common- 
wealth. To  aid  in  this  work  the  tax  commis- 
sioner is  authorized  to  appoint  an  income  tax 
deputy  who  will  have  immediate  charge  of  the 
assessment  of  income.  He  is  also  authorized  to 
divide  the  state  into  income  tax  districts  and  to 
appoint  an  income  tax  assessor  for  each   dis- 


INCOME  TAX  13 

trict.  We  may  expect,  therefore,  that  there  will 
be  organized  not  less  than  a  dozen  or  fifteen  in- 
come tax  districts,  so  that  the  administration 
of  the  law  will  be  in  some  measure  localized, 
although  retaining  the  principle  of  responsibility 
to  the  single  ultimate  authority,  the  state  tax 
commissioner.  Under  these  provisions  we  may 
count  on  intelligent  and  even-handed  enforce- 
ment of  the  law  in  every  town  or  city  in  the 
state,  so  that  when  the  income  tax  goes  into 
operation  every  owner  of  intangible  property 
will  feel  assured  that  all  are  being  treated  alike. 
Under  such  conditions  we  may  expect  that  the 
law  will  be  as  fully  and  as  cheerfully  complied 
with  as  was  the  income  tax  act  that  went  into 
operation  in  Wisconsin  in  1912. 

We  have  been  so  long  the  victims  of  a  bad 
system  of  taxation  that  many  persons  have  be- 
come skeptical  about  the  possibility  of  enforcing 
any  law  requiring  the  taxation  of  personal  prop- 
erty or  income.  But  the  success  of  Wisconsin  in 
collecting  a  reasonable  income  tax  has  shown 
that  the  wholesale  evasion  that  exists  under  a 
general  property  tax  is  due  to  the  faults  of  the 
law  rather  than  to  wilful  dishonesty  of  the  citi- 
zens. An  unreasonable  law  administered  in 
three  hundred  and  fifty  different  ways  by  three 
hundred  and  fifty  local  boards  of  assessors  in 
Massachusetts  could  hardly  be  expected  to  pro- 
duce any  result  but  wholesale  evasion.  Upon 
the  other  hand,  a  reasonable  law  administered 
by  state  assessors  of  income  under  the  direc- 
tion of  the  tax  commissioner  will  undoubtedly 
secure  as  good  results  in  Massachusetts  as  it 
does  in  Wisconsin.  We  may  reasonably  expect, 
therefore,  that  the  new  income  tax  act  will  solve 
the  most  vexed  of  vexing  problems,  that  of  tax- 
ing intangible  personal  property. 

Besides  taxing  the  income  from  intangible 
property,  the  new  act  imposes  a  tax  at  the  rate 
of  one  and  one-half  per  cent  upon  income  de- 
rived from  annuities  and  from  "professions,  em- 
ployments, trade,  or  business."  This  part  of  the 
law  contains  nothing  new  in  principle,  since  these 
classes  of  income  have  long  been  taxable  as 
personal  property.  But  the  new  law  imposes  a 
uniform  rate  and  makes  important  improvements 
in  the  details  of  the  tax. 

Under  the  old  law  income  from  an  annuity 
was  taxable  upon  its  entire  amount.  The  new 
law  provides  for  an  exemption  of  the  same  sort 
that  is  authorized  in  the  case  of  income  from 
intangible  property.  Hereafter,  $300  of  any 
annuity  will  be  exempt  from  taxation  provided 
that  the  total  income  of  the  annuitant  from  all 


14  THE  MASSACHUSETTS 

sources  does  not  exceed  $600.  But  the  law 
stipulates  that  annuitants  who  also  receive  tax- 
able income  from  intangible  property  shall  not 
have  an  aggregate  exemption  of  more  than 
$300. 

The  provisions  of  the  law  concerning  income 
from  professions,  employments,  trade,  or  busi- 
ness are  noteworthy  because  they  carefully  de- 
fine what  constitutes  taxable  income.  The  old 
law  merely  provided  that  such  "income"  should 
be  taxed.  There  was  indeed  a  proviso  that  in- 
come "derived  from  property  subject  to  taxa- 
tion" should  not  be  taxed,  but  the  Supreme 
Court  had  held  that  this  did  not  prevent  a 
merchant  from  being  taxed  upon  the  entire  in- 
come from  his  business,  so  that  everything  was 
very  much  in  the  air.  The  new  law  carefully 
defines  taxable  income.  In  effect,  the  income 
hereafter  subject  to  taxation  will  be  the  net 
income  of  the  business  determined  substantially 
as  any  good  accountant  would  compute  it;  and 
the  further  provision  is  made  that  a  taxpayer 
shall  be  entitled  to  deduct  from  such  net  in- 
come an  amount  equal  to  five  per  cent  of  the 
assessed  value  of  the  stock  in  trade  and  other 
tangible  property,  real  and  personal,  owned  by 
him  and  used  in  the  business.  Thus  the  new 
act  exempts  so  much  of  the  taxpayer's  income 
as  represents  a  fair  rate  of  interest  upon  the 
tangible  property  for  which  the  business  is  taxed. 

The  new  law  continues  the  exemption  of 
two  thousand  dollars  of  professional  or  business 
income,  which  had  always  been  granted  by  the 
old.  It  provides  a  further  exemption  of  five 
hundred  dollars  for  a  married  person,  and  of  two 
himdred  and  fifty  dollars  for  each  child  under  the 
age  of  eighteen  years  or  for  a  parent  dependent 
upon  the  taxpayer  for  support;  but  provides 
that  in  no  case  shall  this  total  additional  exemp- 
tion exceed  one  thousand  dollars.  The  new 
act,  therefore,  materially  increases  the  exemp- 
tions granted  to  persons  subject  to  the  tax  on 
business  and  professional  incomes. 

The  provisions  for  administering  this  one  and 
one-half  per  cent  tax  are,  of  course,  the  same  as 
those  relating  to  the  six  per  cent  tax  upon  in- 
come from  intangible  property.  Returns  must 
be  made  on  or  before  the  first  of  March  and  fail- 
ure to  comply  with  the  law  will  entail  the  same 
heavy  penalties.  The  tax  will  be  assessed  on 
partnerships  as  such,  and  the  income  of  the  mem- 
bers of  the  partnership  will  be  exempt.  If  any 
of  the  partners  are  not  inhabitants  of  the  com- 
monwealth, their  share  in  the  profits  will  not  be 
taxable,  since  the  law  carries  out  consistently  the 


INCOME  TAX  15 

idea  that  the  tax  is  a  personal  income  tax  upon 
inhabitants  of  Massachusetts. 

In  addition  to  the  tax  upon  professional  and 
business  incomes,  the  new  law  provides  for  a 
special  tax  at  the  rate  of  3%  upon  the  excess  of 
the  gains  over  the  losses  resulting  from  purchases 
or  sales  of  intangible  personal  property.  This 
tax  is  due  from  all  inhabitants  of  the  common- 
wealth, whether  they  are  engaged  in  the  busi- 
ness of  dealing  in  intangible  property  or  not,  and 
applies  to  dealings  in  all  classes  of  securities, 
taxable  and  non-taxable.  In  other  words,  it  ap- 
plies to  the  individual  speculator  as  well  as  to 
the  banker  or  broker.  Provision  is  made,  how- 
ever, that  in  the  case  of  trustees  the  gains  shall 
be  determined  not  annually  but  at  the  time 
when  a  trust  is  terminated;  provided,  however, 
that  if  the  trust  continues  for  more  than  five 
years,  the  gains  shall  be  determined  and  the  tax 
paid  at  least  in  every  fifth  year.  The  act  does 
not  define  in  any  detail  what  shall  be  considered 
gains  and  losses,  but  does  state  very  clearly  that 
in  determining  them  the  state  shall  not  go  back  of 
the  first  day  of  January,  1916. 

This  provision  of  the  act  has  aroused  consider- 
able discussion.  Without  it,  gains  from  dealings 
in  intangible  property  would  have  been  taxable 
at  the  rate  of  1^^%  if  they  formed  part  of  the 
income  of  any  business  carried  on  by  inhabitants 
of  the  commonwealth;  but  they  would  not  have 
been  taxable  to  individuals  who  speculated  in 
securities.  Now  an  income  tax  diflFers  from  a 
property  tax  in  that  it  exempts  from  taxation 
property  yielding  no  income,  which,  if  it  has  any 
value,  would  be  taxable  under  a  property  tax.  It 
is  obviously  the  intention  of  the  new  law  that 
persons  who  speculate  in  non-dividend-yielding 
stocks  shall  be  taxed  upon  their  speculative  gains, 
even  though  they  may  not  be  engaged  in  the 
business  of  buying  or  selling  intangible  property. 
That  the  rate  was  placed  at  3%  instead  of  13^% 
was  doubtless  due  in  part  to  the  desire  to  tax  the 
"speculator";  but  it  is  also  explicable  on  the 
ground  that  intangible  property  is  now  exempt 
from  taxation  as  property,  so  that  persons  who 
deal  in  it  may  fairly  be  required  to  pay  a  some- 
what heavier  rate  than  persons  who  deal  in 
merchandise  or  other  taxable  tangible  property. 

Since  the  new  income  tax  is  to  be  strictly  en- 
forced, provision  is  made  for  what  is  called  "in- 
formation at  the  source."  Every  employer  of 
labor  must  report  to  the  tax  commissioner  an- 
nually the  names  and  addresses  of  all  regular 
employees  who  are  inhabitants  of  Massachusetts 
and  have  received  wages,  salaries,  or  other  com- 


16  THE  MASSACHUSETTS 

pensation  in  excess  of  $1800.  It  also  provides 
that  every  corporation  or  association  having 
transferable  shares  which  does  business  in  the 
commonwealth  shall  report  to  the  tax  commis- 
sioner the  names  of  its  shareholders,  unless  its 
stocks  fall  within  the  class  of  tax-exempt  securi- 
ties, and  also  the  names  of  inhabitants  of  Massa- 
chusetts to  whom  it  has  paid  annuities,  or  inter- 
est upon  its  bonds,  notes  or  other  evidences  of 
indebtedness,  except  interest  on  coupon  bonds, 
and  income  exempt  from  taxation  under  the  act. 
Neither  of  these  requirements  is  unduly  burden- 
some, so  that  no  such  difficulties  will  arise  as  have 
developed  under  the  federal  income  tax. 

Taxpayers  who  in  the  past  have  been  assessed 
for  intangible  property  under  the  old  law  will 
need  to  pay  especial  attention  to  Section  22  of 
the  new  act.  This  provides  that  in  1917,  when 
the  income  tax  goes  into  effect,  and  therefore 
personal  income  and  intangible  property  become 
exempt  from  local  taxation,  no  person's  local 
assessment  of  personal  estate  shall  be  reduced 
below  the  amount  assessed  in  1916,  unless  he 
makes  a  return  of  such  personal  property  as 
remains  subject  to  local  taxation.  This  means 
that,  in  order  to  benefit  by  the  exemption  of  in- 
come or  intangible  property,  taxpayers  must  file 
with  their  local  assessors  in  1917  a  return  of 
their  taxable  tangible  personalty.  For  the  aver- 
age taxpayer  this  will  mean  household  furniture 
in  excess  of  $1000,  automobiles,  horses,  car- 
riages, and  livestock;  and  for  merchants  and  man- 
ufacturers it  will  mean  a  return  of  merchandise 
and  machinery.  In  this  manner  there  will  be 
secured  in  1917  a  much  fuller  return  of  tangible 
personal  property  than  has  ever  been  had  before, 
so  that  the  new  law,  by  providing  a  just  and 
practicable  method  of  taxing  intangibles,  will 
remove  many  of  the  difficulties  that  have  hitherto 
attended  the  taxation  of  tangible  property. 

The  new  law  is  calculated  to  yield  a  revenue 
substantially  greater  than  is  now  derived  from 
intangible  property  and  taxable  incomes,  and, 
with  the  efficient  methods  of  administration 
that  have  been  provided,  there  can  be  little 
doubt  that  it  will  fulfill  expectations.  Greatly 
in  its  favor  is  the  fact  that  it  was  adopted  only 
after  nine  or  ten  years  of  constant  discussion, 
which  familiarized  the  people  of  the  common- 
wealth with  the  evils  of  the  existing  system  and 
the  need  of  having  reasonable  and  enforceable 
tax  laws.  It  represents  a  general  consensus  of 
opinion  after  thorough  and  long  discussion,  and 
therefore  gives  assurance  of  relative  permanency. 
The  people  of  the  commonwealth   can,  there- 


INCOME  TAX  17 

fore,  readjust  their  affairs  with  the  reasonable 
expectation  that  a  solution  has  been  found  of 
the  most  difficult  of  our  taxation  problems. 
This,  at  any  rate,  has  been  the  experience  of 
other  states  that  have  introduced  just  and  prac- 
ticable methods  of  taxing  intangible  property. 
Massachusetts  makes  the  change  under  pecu- 
liarly favorable  conditions,  and  there  is  no  rea- 
sonable ground  for  doubt  about  the  result. 


SUMMARY  OF  THE  INCOME  TAX 

I.  The  Following  Taxes  on  Incomes  are  to 

BE  Levied  in  the  Year  1917  and  Each 
Year  Thereafter.     (Sec.  1,  1.  1.) 

II.  Income  Subject  to  a  Tax  of    Six    Per 

Cent.     (Sec.  2.) 

A.  Income  from  bonds,  notes,  money  at  interest, 
and  debts  due  is  taxed  in  general;  but  income 
from  property  of  the  following  classes  is  exempt: 

*    (Sec.  2,1.  6.) 

1.  Deposits   in   savings   banks   in    Massa- 

chusetts.    (Sec.  2,  1.  9.) 

2.  Deposits  in  savings  departments  of  trust 

companies  in  Massachusetts  which  do 
not  exceed  the  limits  imposed  on  de- 
posits in  savings  banks.    (Sec.  2,  1.  12.) 

3.  Deposits  in  the  Massachusetts  Hospital 

Life  Insurance  Company.  (Sec.  2,  1. 
11.) 

4.  Bonds  of  the  United  States.  (Sec.  2, 1. 19.) 

5.  Bonds  or  certificates  of  indebtedness  of 

the  commonwealth  issued  since  Janu- 
ary 1,  1906,  which  state  on  their  face 
that  they  are  exempt  from  tax.  (Sec. 
2,  1.  20.) 

6.  Bonds,  notes  and  certificates  of  indebted- 

ness of  political  subdivisions  of  the  com- 
monwealth, issued  on  or  after  May  1, 
1908,  which  state  on  their  face  that  they 
are  exempt  from  tax.    (Sec.  2, 1.  21.) 

7.  Loans  secured  exclusively  by  mortgages 

of  real  estate  in  Massachusetts  taxable 
as  real  estate  to  an  amount,  however, 
not  exceeding  the  assessed  value  of  the 
mortgaged  real  estate.    (Sec.  2,  1.  28.) 

B.  Income  from  shares  in  corporations  and  joint 
stock  companies  not  organized  under  the  laws 
of  the  commonwealth  is  taxed,  except  that  in- 
come from  property  of  the  following  classes  is 
exempt:  (Sec.  2,  1.  33.) 

1.  Shares  of  national  banks.    (Sec.  2,  1.  36.) 

2.  Shares  of  foreign  railroad,  street  railway, 

electric  railroad,  telegraph  and  tele- 
phone companies  doing  business  in  the 
commonwealth.    (Sec.  2,  1.  36.) 

C  Income  from  shares  in  partnerships,  associa- 
tions or  trusts,  the  beneficial  interest  in  which 
is  represented  by  transferable  shares,  is  taxed 
in  general;  but  income  from  the  following  is 
exempt:  (Sec.  2, 1.  44.) 

*  The  sections  and  lines  printed  in  this  summary  refer  to 
sections  and  lines  of  the  Act  beginning  on  page  31. 


INCOME  TAX  LAW  19 

1.  Income  from  shares  in  such  partnerships, 
associations  or  trusts  which  file  an  agree- 
ment with  the  tax  commissioner  to  pay 
the  same  taxes  for  which  they  would 
be  liable  if  an  individual,  and  whose 
property  consists  exclusively  of  one  or 
more  of  the  following  classes.     (Sec.  2, 
1.  48;  sec.  2,  1.  86.) 
(a)  Real   estate   wherever   situated   and 
supplies  therefor  and  receipts  there- 
from.   (Sec.  2,  1.  53.) 
(6)  Stocks    of    corporations    paying    so- 
called  franchise  tax  to  the  common- 
wealth.    This  includes  all  Massa- 
chusetts corporations.     (Sec.  2,  1. 
54.) 

(c)  Intangible  property  the  income  from 

which  is  exempt  from  taxation  un- 
der paragraphs  4,  5,  6  and  7  of  Sec- 
tion II  (A),  above.    (Sec.  2,  1.  59.) 

(d)  Property  the  income  of  which  would 

be  taxable  under  II  if  owned  by  an 
inhabitant.    (Sec.  2,  1.  63.) 

(e)  Shares  in  partnerships,  associations  or 

trusts,  dividends  on  which  are  ex- 
empt   from    taxation    under    this 
Section  C.    (Sec.  2,  1.  66.) 
2.  Income  from  shares  in  such  partnerships, 
associations   or  trusts   which   file   the 
agreement  mentioned  in  II  (C)  (1)  and 
which  satisfy  the  tax  commissioner  that 
at  least    two-thirds   of   their    taxable 
property  is  taxed  within  the  common- 
wealth and  the  remainder,  if  taxable, 
is  taxed  where  situated.     (Sec.  2,  1.  69.) 

D.  Distributions  of  capital  in  liquidation  or  other- 
wise are  not  included  as  income;  but  accumu- 
lated profits  are  not  regarded  as  capital.    (Sec. 

2,  1.  115.) 

III.    Deductions  and  Exemptions.     (Sec.  3.) 

A.  From  the  income  subject  to  the  tax  of  six  per 
cent,  interest  paid  on  the  following  debts  and 
within  the  following  limits  is  deductible:  (Sec. 

3,  1.  1.) 

1.  Persons  engaged  in  the  business  of  buying y 
selling  or  othervrise  dealing  in  intangible 
personal  property  may  deduct  interest  on 
all  debts  except  those  secured  by  mort- 
gage or  pledge  of  real  estate  or  tangible 
personal  estate.    (Sec.  3,  1.  7.) 
(a)  Provided  that  no  such  deduction  is 
allowed  if  such  business  includes 
buying,  selling,  improving  or  other- 


20  THE  MASSACHUSETTS 

wise  dealing  in  or  with  real  estate, 
or  buying,  selling,  manufacturing 
or  otherwise  dealing  in  or  with 
tangible  personal  property.  (Sec. 
3,  1.  11.) 

2.  Other  persons  (i.e.,  practically  every  one 

except  bankers  and  brokers)  may  de- 
duct interest  on  all  debts  except    (Sec. 
3,  1.  17.) 
(a)  Debts  secured  by  mortgage  or  pledge 
of  real  estate  or  tangible  personal 
estate,  and     (Sec.  3,  1.  17.) 
(6)  Debts  incurred  in  connection  with 
profession,  employment,  trade  or 
business  of  such  person.     (Sec.  3, 
1.  19.) 

3.  The  deduction  under  1  and  2  from  loans 

directly  or  indirectly  secured  by  in- 
tangible personal  property  cannot  ex- 
ceed 80%  of  the  income  from  such  in- 
tangible property  subject  to  the  6% 
tax.  (Sec.  3,  1.  22.) 
Example:  Assume  the  case  of  an  individ- 
ual owning  $100,000  of  non-dividend 
yielding  taxable  and  non-taxable  securi- 
ties, $100,000  of  tax-exempt  securities 
yielding  dividends  amounting  to  $6,000, 
and  $100,000  of  taxable  securities  yield- 
ing dividends  amounting  to  $6,000.  As- 
sume that  he  has  no  other  income  and 
that  these  securities  are  pledged  to  secure 
a  loan  of  $150,000  upon  which  he  is  pay- 
ing $7,500  interest.  In  this  case,  the 
individual  would  have  to  return  for  taxa- 
tion, under  Section  2,  the  $6,000  of  divi- 
dends derived  from  taxable  securities; 
then  since  his  taxable  income  is  $6,000 
and  his  total  income,  without  deducting 
interest,  is  $12,000,  he  is  entitled  to 
deduct  %2  or  one  half  of  the  $7,500  in- 
terest paid  by  him,  i.  e.,  $3,750.  The 
rule  admits  of  reduction  to  the  following 
formula  in  which  X  stands  for  the  amount 
of  the  deduction,  viz.: 

X  :  $7,500  =  $6,000  :  $12,000 

There  is,  however,  a  provision  that  the  de- 
duction shall  not  exceed  80%  of  the  in- 
come returned  by  the  taxpayer  from  tax- 
able securities. 
If  suxih  an  individual  received,  in  addition, 
income  taxable  under  Section  5,  such  in- 
come would  not  be  included  in  the  calcula- 
tion. If,  however,  he  received  $5,000  in- 
come from  real  estate,  that  amount  would 


INCOME  TAX  LAW  21 

be  included  in  his  total  income,  i.  e., 
would  be  added  to  the  last  quantity  in  the 
above  proportion. 
4.  Only  the  same  proportion  of  interest  on 
debts  described  under  1  and  2  can  be 
deducted,  as  the  taxable  income  from 
intangibles  bears  to  the  entire  income 
of  the  taxpayer  from  all  sources  what- 
ever, whether  taxable  or  not,  except 
annuities,  trades,  professions  and  busi- 
nesses.   (Sec.  3,  1.  54.) 
B,  An  exemption  of  $300  is  allowed  if  the  total  in- 
come of  the  taxpayer  from  all  sources  is  less 
than  $600.     (Sec.  4.) 

IV.  Income  Subject  to  a  Tax  of  One   and 
One-Half  Per  Cent.     (Sec.  5.) 

A.  Annuities  are  taxable  at  one  and  one-half  per 
cent,  but  this  does  not  include  income  from 
property  held  in  trust  even  though  paid  in  the 
form  of  an  annuity.    (Sec.  5,  1.  5.) 

1.  Exemption:  An  exemption  of  $300  is  al- 
lowed if  the  total  income  from  all 
sources,  including  non-taxable  income, 
is  less  than  $600;  but  the  total  exemp- 
tion from  income  from  intangibles  sub- 
ject to  six  per  cent  tax,  and  from  annui- 
ties subject  to  one  and  one-half  per 
cent  tax,  cannot  exceed  $300.  (Sec. 
5,  1.  12.) 

B.  The  excess  over  two  thousand  dollars  of  in- 
come from  professions,  employments,  trade  or 
business  is  taxable  at  one  and  one-half  per  cent. 
(Sec.  5,  1.  22.) 

1.  Such  income  is  defined  to  include,  with- 

out limiting  the  generality  of  the  above 
words 
(a)  The  rental  value  of  quarters  furnished 
as  part  of  compensation.     (Sec.  5, 
1.  26.) 
(6)  Gains  from  the  sale  of  capital  assets 
other  than  from  the  sale  of  intangi- 
ble property.     (Sec.  5, 1.  23;  sec.  6, 
1.  4.) 

2.  Exemption:    The  act  exempts  from  the 

one  and  one-half  per  cent  tax,  the  wages 
and  salaries  of  employees  and  ojSBcers  of 
the  United  States  Government;  but  if 
the  sum  of  their  other  income  of  a  taxable 
nature  and  their  wage  or  salary  exceeds 
$2,000,  they  are  taxable  on  the  whole 
of  such  other  taxable  income  or  the 
excess  of  such  sum  over  $2,000,  which- 
ever is  less.    (Sec.  5,  1.  29.) 


22  THE  MASSACHUSETTS 

Example :  A  person  who  receives  as  salary 
from    the    United     States     Government 
$1,800  a  year  and  earns  $1,000  during 
the  year  in  the  real  estate  business  would 
have  taxable  income  of  $800.    If,  how- 
ever, his  salary  from  the  Government  was 
$2,200  and  he  earned  $1,000  from  the 
real  estate  business,  his  taxable  income 
would  be  only  $1,000. 
3.  In  determining  the  excess  which  is  taxable 
at  one  and  one-half  per  cent  the  follow- 
ing  deductions   are   allowed:   (Sec.  6, 
1.6.) 
(a)  Expenses  paid  within  the  year,   in 
connection    with    the    profession, 
employment,    trade    or    business, 
including    ordinary    repairs    (Sec. 
6,  1.  8),  but 
Excluding — 1.  Personal    or    family 
expenses.    (Sec.  6,  1.  10.) 
2.  Insurance  premiums  paid  for  use, 
occupancy  or  rent  insurance. 
(Sec.  6,  1.  11.) 
(6)  A  reasonable  allowance  for  the  de- 
preciation and  obsolescence  of  prop- 
erty within  the  year  and  for  the 
depletion  of  wasting  assets  within 
the  year  owned  and  used  in  connec- 
tion with  such  profession,  employ- 
ment, trade  or  business.     (Sec.  6, 
1.  15.) 
(c)   Taxes  paid  within  the  year  in  respect 
to    the    profession,    employment, 
trade  or  business,  or  on  property 
held  or  used  in  connection  there- 
with,   excluding    assessments    for 
betterments.     (Sec.  6,  1.  28.) 
{d)  Interest  paid  within  the  year  on  in- 
debtedness incurred  in  connection 
with  the  profession,  employment, 
trade  or  business,  excluding  interest 
allowed  as  a  deduction  for  the  piu*- 
poses  of  the  six  per  cent  tax  on  in- 
come from  intangibles.      (Sec.   6, 
1.  35.) 
{e)  Losses  incurred  or  sustained  in  con- 
nection with  the  profession,   em- 
ployment, trade  or  business  within 
the  year.    (Sec.  6,  1.  41.) 

1.  Upon  the  sale  of  capital   assets 

other  than  intangible  property. 
(Sec.  6,  1.  41.) 

2.  By  fire,  theft,  casualty  or  amounts 

paid  on  claims  in  tort  or  con- 
tract,   provided   the    same   are 


INCOME  TAX  LAW  23 

not  covered  by  insurance.    (Sec. 
6,  1.  44.) 
(J)   Debts    arising    since    December    31, 
1915,  in  connection  with  the  profes- 
sion, employment,  trade  or  business 
and  actually  charged  off  during  the 
year,  provided,     (Sec.  6,  1.  49.) 
1.  They  have  been  included  as  in- 
come in  a  previous  return  under 
the  act.    (Sec.  6,  1.  56.) 
(g)  An  amount  equal  to  5  %  of  the  assessed 
value  (in  the  year  for  which  tax 
is  being  computed),  of  the  stock  in 
trade  and  other  tangible  property 
owned,    and    used    or    employed 
therein.     (Sec.  6,  1.  59.) 
If  such  property  is  taxed  outside  the 
commonwealth  on  the  basis  of  its 
income  and  not  of  its  capital  value, 
the  tax  commissioner  may  allow  a 
deduction  of  5%  of  the  value  of 
such  property  as  determined  by 
him.     (Sec.  6,  1.  66.) 
(h)  The  following  specific  sums,  but  the 
aggregate  deduction  for  husband, 
wife,  children  and  dependent  par- 
ents is  not  to  exceed  $1,000.    (Sec. 
6, 1.  76.) 

1.  Five  hundred  dollars  for  a  husband 

or  wife  with  whom  the  taxpayer 
lives,  but  that  amount  may  be 
prorated  as  they  agree  or  in  pro- 
portion to  the  net  income  of  each 
in  excess  of  $2,000.  (Sec.  6, 1.  76.) 

2.  Two  hundred  and  fifty  dollars  for 

each  child  under  18  years.  (Sec. 
6,  1.  78.) 

3.  Two  hundred  and  fifty  dollars  for 

each  parent  entirely  dependent 
for    support    upon    the    person 
making  return.    (Sec.  6,  1.  80.) 
(i)   Interest  and  dividends  taxable  under 
this  act  at  the  rate  of  6%,  and  in- 
come derived  from  property  not 
subject  to  taxation  under  Chapter 
490  of  the  Acts  of  1909  and  acts  in 
amendment  thereof  and  in  addition 
thereto,  and  income  from  certain 
forest  lands.     (Sec.  6,  1.  90.) 

V.  Income  Subject  to  a  Tax  of  Three  Per 
Cent.     (Sec.  5,  1.  39.) 

A.  The  excess  of  gains  over  losses  from  purchases  or 
sales  of  intangible  personal  property  whether 


/ 


24  THE  MASSACHUSETTS 

or  not  the  taxpayer  is  a  dealer  in  securities. 
(Sec.  5,  1.  39.) 

1.  Trustees  may  pay  the  tax  out  of  principal 

and  are  required  to  make  a  return  of 
such  gains  at  least  every  fifth  year.  If 
the  trust  terminates  within  five  years, 
then  the  tax  is  to  be  paid  at  the  ter- 
mination of  the  trust.     (Sec.  5,  1.  44.) 

2.  Determination  of  value.    (Sec.  7,  1.  6.) 

(a)  If  the  property  was  owned  January  1, 

1916,  the  value  on  that  date  is  the 
basis.     (Sec.  7, 1.  8.) 

(b)  If  purchased  subsequently,  then  the 

value  on  the  date  of  acquisition  is 
the  basis.    (Sec.  7, 1.  11.) 

Note:  The  tax  commissioner  is  authorized  to 
make  rules  and  regulations  not  inconsistent 
with  the  act  for  the  purpose  of  effecting  its  pro- 
visions, and  he  will  doubtless  define  the  words 
"gains"  and  "losses"  for  the  purpose  of  com- 
puting the  excess  which  is  taxable  at  the  rate  of 
3%. 

VI.  Additional  Provision  as  to  Estates, 
Fiduciaries  and  Partnerships.  (Sees. 
8,  9,  and  10.) 

A.  Estates  of  Deceased  Persons.    (Sec.  8.) 

1.  Income  received  by  persons  since  deceased 

is  taxed  to  the  estate  of  such  persons. 
(Sec.  8,  1.  1.) 

2.  Income  received  by  the  estate  of  a  de- 

ceased inhabitant  is  assessed  to  the  ex- 
ecutor or  administrator,  to  the  extent 
that  the  beneficiaries  are  residents  of 
Massachusetts.    (Sec.  8,  1.  3.) 

S.  No  person  is  taxable  for  income  received 
from  an  estate  which  has  been  taxed  on 
such  income.    (Sec.  8,  1.  15.) 

4.  Taxes  must  be  assessed  within  one  year 
from  the  appointment  of  the  executor  or 
administrator  or  within  three  months 
from  the  time  of  filing  the  inventory,  if 
the  inventory  has  not  been  filed  at  the 
end  of  nine  months.    (Sec.  8, 1.  19.) 

B.  Trustees.     (Sec.  9.) 

1.  Except  as  follows,  trustees  are  taxed  under 

the  same  provisions  as  executors  and 
administrators.     (Sec.  8, 1.  34.) 

2.  If  any  trustee  lives  in  Massachusetts,  or  is 

appointed  by  a  court  in  this  common- 
wealth, the  income  received  by  such 
trustee  is  subject  to  tax  to  the  extent 


INCOME  TAX  LAW  25 

that  the  beneficiaries  to  whom  it  is  paid 
or  for  whom  it  is  accumulated  are  in- 
habitants of  Massachusetts.  No  tax  is 
assessed  as  to  the  balance  of  the  income. 
(Sec.  9,  1.  1;  sec.  9,  1.  12.) 
Example:  A  trustee  in  Massachusetts  re- 
ceives during  the  year  $1,000  in  dividends 
from  foreign  corporations  and  $1,000  in 
interest  on  tax-exempt  municipal  bonds. 
By  the  terms  of  the  trust  the  income  is  di- 
vided equally  between  two  beneficiaries ,  one 
a  resident  and  one  a  non-resident.  The 
trustee  would  be  subject  to  a  tax  of  6%  on 
$500. 

3.  If  all  the  trustees  are  non-residents,  the 

income  received  by  the  beneficiaries  who 
are  inhabitants  is  taxable  according  to 
the  nature  of  the  income  received  by 
the  non-resident  trustees.  (Sec.  9, 1.  17.) 
Example:  If  the  trustee  in  the  example  under 
2  lived  outside  of  Massachusetts,  the  Mas- 
sachusetts beneficiary  would  be  required  to 
include  in  his  return  as  taxable  income  the 
sum  of  $500. 

4.  No  person  is  taxable  for  income  received 

from  a  trustee  who  has  been  taxed  on 
such  income.  (Sec.  8, 1.  34;  sec.  8, 1.  15.) 

5.  Provision  is  made  for  the  fiduciary  to 

claim  the  benefit  of  the  $300  exemption. 
(Sec.  9, 1.  26.) 

6.  These  same  principles  apply  so  far  as  ap- 

plicable to  guardians,  conservators, 
trustees  in  bankruptcy,  receivers  and 
assignees  for  creditors,  as  are  applicable 
to  trustees.    (Sec.  9,  1.  70.) 

7.  Income  accumulating  for  unborn  or  un- 

ascertained interests  is  taxed  as  if  for  a 
resident.    (Sec.  9,  1.  75.) 

8.  In  order  to  facilitate  settlement  of  estates, 

the  tax  commissioner  with  the  approval 
of  the  attorney  general  may  agree  upon 
the  amount  of  taxes  due  or  to  become 
due  and  payment  of  such  amount  is 
full  satisfaction  of  the  taxes  referred  to 
in  such  agreement.    (Sec.  9,  1.  80.) 

Partnerships  (not  including  partnerships,  as- 
sociations or  trusts,  the  beneficial  interest  in 
which  is  represented  by  transferable  shares). 
(Sec.  10.) 

1.  Partnerships  of  which  any  member  is  an 
inhabitant  of  Massachusetts  and  which 
have  a  usual  place  of  business  in  Massa- 
chusetts are  assessed  on  their  profits  or 
income  in  proportion  to  the  interest  of 


26  THE  MASSACHUSETTS 

the  partners  who  are  inhabitants  of 
Massachusetts.    (Sec.  10,  1.  1.) 

2.  The  individual  partners  are  not  assessable 

for  income  from  such  partnership.  (Sec, 
10, 1.  14.) 

3.  At  the  request  of  any  partner,  the  partner- 

ship may  claim  the  benefit  of  the  $300 
exemption  to  which  such  partner  may 
be  entitled.    (Sec.  10,  1.  17.) 

4.  A   Massachusetts    inhabitant  who    is  a 

member  of  a  partnership  not  doing 
business  in  Massachusetts  is  taxable  on 
income  received  therefrom  as  he  would 
be  if  the  income  were  received  directly 
by  him  instead  of  through  the  partner- 
ship.    (Sec.  10,  1.  39.) 

5.  The  provisions  of  the  act  as  to  returns,  as- 

sessment, abatement  and  collection  of 
taxes  apply  to  partnerships  subject  to 
tax.    (Sec.  10,  1.  47.) 
D.  Partnerships,  associations  and  trusts,  the  bene- 
ficial interests  in  which  are  represented  by 
transferable  shares  are 

1.  Liable  for  all  taxes  imposed  by  the  act 
as  if  an  individual,  if  dividends  on  such 
transferable  shares  are  exempt  from  tax 
hereunder.     (Sec.  2, 1.  77;  sec.  5, 1.  66.) 

VII.  Exemption     from     Local     Taxation. 

(Sec.  11.) 

After  1916,  income  taxable  under  this  act  at 
the  rate  of  \}/2%  or  3%  and  property  the  in- 
come of  which  is  taxable  under  this  act  and 
has  been  returned,  are  exempt  from  other  tax- 
ation. 

VIII.  Returns   are   Required   under  Oath 

AS  Follows.     (Sec.  12.) 

A.  Such  returns  are  due  annually  on  or  before 
March  1st,  beginning  1917,  covering  income  for 
calendar  year  ending  the  preceding  December 
31st.    (Sec.  12,  1.  46.) 

B.  Such  returns  are  required  from    (Sec.  12, 1.  1.) 

1.  Every  individual  inhabitant,  including 
partnerships,  associations  and  trusts, 
whose  annual  income  exceeds  two 
thousand  dollars,  except  that  he  need 
not  return  income  from  (Sec.  12, 1. 1.) 
(a)  Real  estate.  (Sec.  12,  1.  6.) 
(6)  Dividends    exempt    under    this    act. 

(Sec.  12,  I.  7.) 
(c)   Interest    on    bonds    of    the    United 
States.    (Sec.  12, 1.  8.) 


INCOME  TAX  LAW  27 

(d)  Interest  upon  bonds,  notes  or  certifi- 

cates of  indebtedness  of  the  com- 
monwealth and  its  poHtical  subdi- 
visions, which  is  exempt  under  the 
act.    (Sec.  12, 1.  10.) 

(e)  Interest  on  loans  secured  by  mort- 

gage of  real  estate  within  the  com- 
monwealth not  exceeding  the  as- 
sessed value.    (Sec.  12,  1.  18.) 
(J)   Wages  or  salaries  received  from  the 
United  States.    (Sec.  12, 1.  22.) 

2.  Every  other  individual  inhabitant  who 

receives  any  income  subject  to  the  6% 
tax,  or  from  an  annuity  (except  from  a 
trust)  or  any  gains  in  excess  of  losses 
as  defined  by  the  tax  commissioner,  on 
dealings  in  intangible  property,  must 
make  a  return  of  such  income.  (Sec. 
12,  1.  23.) 

3.  Every  fiduciary,  person,  trustee  in  bank- 

ruptcy, assignee  for  creditors  and  cer- 
tain receivers,  who  receives  taxable  in- 
come must  file  like  returns  of  taxable 
income.    (Sec.  12,  1.  29.) 

4.  Every  person  who  is  or  who  becomes  an 

inhabitant  of  Massachusetts  at  any 
time  between  January  1st  and  June 
30th,  in  any  year,  and  who  received  tax- 
able income  in  the  preceding  year. 
(Sec.  12,  1.  51.) 

C.  Filing.    (Sec.  12,  1.  37.) 

1.  Such  returns  may  be  filed  with  the  income 
tax  assessor  for  the  district  where  the 
taxpayer  resides  or  has  his  principal 
place  of  business,  or  at  option  of  tax- 
payer, with  the  tax  commissioner. 

D.  Forms  and  blanks.    (Sec.  12,  1.  72.) 

1.  The  tax  commissioner  is  required  to 
provide  blanks,  but  failure  to  receive 
one  does  not  excuse  the  making  of  a 
return.    (Sec.  12,  1.  72.) 

E.  Special  returns  under  oath  may  be  required  of 
all  income,  whether  taxable  or  not,  if  the  tax 
commissioner  is  of  the  opinion  that  any  person 
has  not  filed  a  return  when  required  to  do  so, 
or  intentionally  or  through  error  has  omitted 
taxable  income  from  a  return  which  has  been 
filed.  Such  special  return  does  not  relieve  the 
taxpayer  from  the  penalties  imposed.  (Sec. 
12,  1.  87.) 

IX.  Penalties.     (Sec.  13.) 

Severe  penalties  as  follows  are  provided  for 
failure  to  file  returns  when  required: 


28  THE  IVIASSACHUSETTS 

1.  Fine  or  imprisonment,  or  both.    (Sec.  13, 

1.  1;  sec.  13,  1.  33.) 

2.  Disqualification  for  public  office.     (Sec. 

13,  1.  44.) 

3.  The  tax  commissioner  is  to  assess  a  tax  on 

twice  the  amount  of  income  he  can  dis- 
cover.   (Sec.  14,  1.  27.) 

4.  Abatements  are  limited  to  an  amount 

equal  to  twice  the  amount  of  the  tax. 
(Sec.  19, 1.  21.) 

5.  A  writ  of  mandamus  may  issue  compelling 

a  person  to  file  a  return.    (Sec.  13, 1. 1 1 .) 

X.  Assessment,  Collection,  Abatement  and 
Distribution  of  Taxes.     (Sees.  14-19.) 

A.  The  tax  commissioner  or  his  deputy  have 
charge  of  all  the  administrative  features  of  the 
act.    (Sec.  14.) 

B.  The  tax  commissioner  may  proceed  under  the 
authority  given  to  discover  income  and  collect 
taxes  thereon  within  two  years  from  the  time 
when  the  return  was  due.  (Sec.  14,  1.  13;  sec. 
14,  1.  27). 

C.  The  tax  commissioner  may  allow  extensions  of 
time  for  filing  returns  in  case  of  sickness,  ab- 
sence or  other  disability.    (Sec.  14,  1.  36.) 

D.  Taxes  are  due  on  October  15th  of  each  year  and 
may  be  paid  to  the  tax  commissioner  or  to  the 
income  tax  assessor  for  the  district  in  which 
the  taxpayer  lives.    (Sec.  15,  1.  6.) 

E.  Returns  are  to  be  open  only  to  the  tax  com- 
missioner and  the  income  tax  assessors  and 
their  deputies,  assistants  and  clerks  when  act- 
ing under  their  authority.    (Sec.  16.) 

1.  Penalty  for  disclosure  is  a  fine  not  exceed- 

ing $1,000  or  imprisonment  not  exceed- 
ing six  months,  or  both,  and  disquali- 
fication for  public  office  for  not  over 
three  years.    (Sec.  16,  1.  6.) 

2.  Indexes  of  persons  fifing  returns  are  to  be 

open  to  the  public  at  the  office  of  each 
income  tax  assessor.    (Sec.  16,  1.  24.) 

F.  The  act  provides  for  income  tax  assessors  who 
are  to  have  charge  of  the  income  tax  districts 
into  which  the  state  is  to  be  divided.  Such  as- 
sessors are  appointed  by  the  tax  commissioner 
with  the  advice  and  consent  of  the  governor  and 
council.    (Sec.  17.) 

0.  Abatements.     (Sec.  19.) 

1.  Tax  may  be  abated  or  refunded  by  the  tax 

commissioner  upon  an  appfication  filed 
within  three  months  from  the  date  of 
notice  of  assessment.    (Sec.  19,  1.  1.) 

2.  No  abatement  below  double  the  amount 


INCOME  TAX  LAW  29 

of  the  tax  is  allowed  if  the  return  is 
not  filed  on  time;  or  if  a  fraudulent, 
incorrect  or  insujQScient  return  has 
been  filed  and  is  not  corrected  after 
notice  to  do  so.  (Sec.  19, 1.  15.) 
S.  Appeal  may  be  taken  from  the  decision  of 
the  conmiissioner  to  the  board  of  appeal 
or  a  complaint  entered  against  the  tax 
commissioner  in  the  Superior  Court. 
(Sec.  20.) 

E.  Additional  local  taxes.     (Sec.  21.) 

1.  Unless  a  return  is  filed  with  the  income  tax 

assessor  or  the  tax  commissioner,  taxes 
at  the  local  rate  are  to  be  assessed  on 
property,  the  income  of  which  would 
be  taxable  under  this  act,  if  such  a  tax 
is  greater  than  the  income  tax  would 
be,    imless   the   taxpayer  establishes: 
(Sec.  21,  1.  1.) 
(a)  That  the  income  was  properly  re- 
turned, or     (Sec.  21,  1.  39.) 
(6)  That  it  was  not  taxable,  or    (Sec.  21, 

1.  41.) 
(c)  That  there  was  reasonable  excuse  for 
not  making  a  return.  (Sec.  21, 1. 41.) 

2.  Unless  a  return  is  filed  in  1917  with  the 

local  assessor  of  taxable  tangible  personal 
'property,  the  taxpayei*  is  to  be  assessed 
at  the  local  rate  on  an  amount  of  per- 
sonal property  not  less  than  that  on 
which  he  was  assessed  in  1916.  (Sec. 
22.) 

/.  Distribution  of  the  tax.    (Sec.  23.) 

1.  The  commonwealth  is  to  pay  each  city 
and  town  in  1917  an  amoimt  equal  to 
the  difference  between  the  amount  ob- 
tained by  applying  the  1915  local  rate 
to  the  1917  assessment  on  tangible  per- 
sonal property,  and  the  amount  of  local 
taxes  on  tangible  and  intangible  per- 
sonal property  in  1915.  Any  balance  is 
distributed  in  the  same  proportions  as 
the  state  tax  is  assessed.  After  1917 
taxes  are  to  be  distributed  as  Legislature 
determines. 

XL    Information  at  the  Source.    (Sec.  25.) 

A.  Every  employer  doing  business  in  or  being  an 
inhabitant  of  the  commonwealth  is  required  to 
file  annually  on  or  before  March  1st,  the  names 
and  addresses  of  every  employee  to  whom  have 
been  paid  wages,  salary  or  compensation  in 
excess  of  $1,800  during  the  preceding  year,  and 


30  THE  MASSACHUSETTS 

the  amount  paid  to  each  such  employee.    (Sec. 
25, 1.  1.) 

B.  Every  corporation  and  every  partnership,  as- 
sociation or  trust,  the  beneficial  interest  in 
which  is  representee!  by  transferable  shares, 
doing  business  in  Massachusetts  is  required  to 
file  with  the  tax  commissioner  on  or  before 
March  1st  of  each  year.     (Sec.  25,  1.  14.) 

1.  The  names  and  addresses  of  all  share- 

holders as  of  record  December  31st,  or 
at  its  option,  of  those  in  Massachusetts, 
unless  the  income  on  its  shares  is 
exempt  under  the  act.  (Sec.  25,  1.  14.) 
(a)  The  tax   commissioner   may  accept 

a  Ust  as  of  any  other  date.     (Sec. 

25,  1.  27.) 

2.  The  names  and  addresses  of  residents  to 

whom  it  has  paid  annuities,  or  interest 
upon  its  bonds,  notes  or  other  evi- 
dences of  indebtedness,  except  on 
bearer  coupons  and  except  income 
exempt  from  taxation  under  this  act. 
(Sec.  25,  1.  33.) 

C.  Penalties  for  failure  to  file  such  returns.  (Sec. 
25,  1.  58.) 

1.  A  fine  of  not  less  than  $25  nor  more  than 
$500  is  provided  for  each  failure  to 
file  the  required  return.  (Sec.  25,  1. 
58.) 

D.  The  treasurers  of  every  city,  town  and  county, 
and  the  auditor  of  the  commonwealth  is  to 
file  not  later  than  April  10th  of  each  year  the 
names  and  addresses  of  all  employees  receiving 
more  than  $1,800  a  year,  and  the  amounts  re- 
ceived by  each.    (Sec.  26.) 


THE  MASSACHUSETTS  INCOME 
TAX  LAW 


An  Act  to  impose  a  Tax  upon  the  Income  re- 
ceived from  Certain  Forms  of  Intangible 
Property  and  from  Trades  and  Professions. 

Be  it  enacted  by  the  Senate  and  House  of  Repre- 
sentatives in  General  Court  assembled,  and  by  the 
authority  of  the  same,  as  follows: 

Section  1.  There  shall  be  levied  in  the  year 
nineteen  hundred  and  seventeen,  and  in  each 
year  thereafter,  a  tax  upon  incomes  as  herein- 
after set  forth. 

taxation  of  income  derived  from 
certain  intangibles 

Section  2.  Income  of  the  following  classes 
received  by  any  inhabitant  of  this  common- 
wealth during  the  calendar  year  prior  to  the 
assessment  of  the  tax  shall  be  taxed  at  the  rate 

5  of  six  per  cent  per  annum: 

(a)  Interest  from  bonds,  notes,  money  at 
interest  and  all  debts  due  the  person  to  be 
taxed,  except  from : 

First:   Deposits  in  any  savings  bank  char- 

10  tered  by  this  commonwealth  or  in  the  Massa- 
chusetts Hospital  Life  Insurance  Company,  or 
such  of  the  deposits  in  the  savings  department 
of  any  trust  company  so  chartered  as  do  not 
exceed  in  amount  the  limits  imposed  upon  de- 

15  posits  in  savings  banks  by  section  forty-six  of 

chapter  five  hundred  and  ninety  of  the  acts  of 

the  year  nineteen  hundred  and  eight,  and  acts 

in  amendment  thereof  and  in  addition  thereto. 

Second :  Bonds  of  the  United  States  and  such 

20  bonds,  notes  and  certificates  of  indebtedness  of 
the  commonwealth  and  of  political  subdivisions 
thereof  as  are  exempt  from  taxation  under  the 
provisions  of  clause  fifteen  of  section  five  of 
Part  I  of  chapter  four  hundred  and  ninety  of 

25  the  acts  of  the  year  nineteen  hundred  and  nine, 
and  acts  in  amendment  thereof  and  in  addition 
thereto. 

Third:  Loans  secured  exclusively  by  mort- 
gages of  real  estate,  taxable  as  real  estate,  situ- 

30  ated  within  the  commonwealth,  to  an  amount 
not  exceeding  the  assessed  value  of  the  mort- 
gaged real  estate. 

(6)  Dividends  on  shares  in  all  corporations 


32  THE  MASSACHUSETTS 

and  joint  stock  companies  organized  under  the 

85  laws  of  any  state  or  nation  other  than  this  com- 
monwealth, except  national  banks  and  except 
such  foreign  corporations  as  are  subject  to  a  tax 
upon  their  franchises  payable  to  this  common- 
wealth under  the  provisions  of  sections  forty- 

40  three  and  fifty-two  of  Part  III  of  chapter  four 
hundred  and  ninety  of  the  acts  of  the  year 
nineteen  hundred  and  nine,  and  acts  in  amend- 
ment thereof  and  in  addition  thereto. 

(c)  Dividends  on  shares  in  partnerships,  as- 

45  sociations  or  trusts,  the  beneficial  interest  in 
which  is  represented  by  transferable  shares, 
except  dividends  on  shares  of  the  following: 

First:  Partnerships,  associations  or  trusts, 
which  file  with  the  tax  commissioner  the  agree- 

60  ment  hereinafter  provided  for,  and  the  property 
of  which  consists  exclusively  of  one  or  more  of 
the  following  specified  kinds  of  property,  to  wit: 
real  estate  wherever  situated  and  supplies  there- 
for and  receipts  therefrom;   stocks  of  corpora- 

55  tions  taxable  under  the  provisions  of  sections 
forty-three  and  fifty-two  of  Part  III  of  chapter 
four  hundred  and  ninety  of  the  acts  of  the  year 
nineteen  hundred  and  nine  and  acts  in  amend- 
ment thereof  and  in  addition  thereto;   bonds, 

60  notes,  loans  secured  by  mortgage  of  real  estate, 
and  certificates  of  indebtedness,  the  income  of 
which  is  exempt  from  taxation  under  the  pro- 
visions of  this  section;  property  the  income  of 
which,  if  any,  would  be  taxable  under  this 

65  section  if  owned  by  an  inhabitant  of  the  com- 
monwealth; shares  in  partnerships,  associa- 
tions or  trusts,  dividends  on  which  are  exempt 
from  taxation  under  this  section. 

Second:  Partnerships,  associations  or  trusts, 

70  the  beneficial  interest  in  which  is  represented 
by  transferable  shares,  which  file  such  agree- 
ment and  furnish  satisfactory  proof  to  the  tax 
commissioner  that  two  thirds,  at  least,  of  their 
taxable  property  is  taxed  within  the  common- 

75  wealth  and  that  the  remainder,  if  taxable,  is 
taxed  where  it  is  situated. 

Partnerships,  associations  or  trusts,  the  divi- 
dends on  shares  of  which  are  exempt  from 
taxation  under  this  section,  shall  pay  to  the  tax 

80  commissioner  annually  a  tax  of  six  per  cent  of 
the  income  derived  from  any  property  owned 
by  such  partnerships,  associations  or  trusts,  so 
far  as  such  income  would  be  taxable  under  this 
section  if  received  by  an  inhabitant  of  the  com- 

85  monwealth. 

Dividends  on  the  shares  of  any  partnership, 
association  or  trust,  of  the  classes  designated  in 
paragraphs  first  and  second  of  subsection  (c)  of 


INCOME  TAX  LAW  33 

this  section  shall  be  subject  to  taxation  under 

90  this  section  unless  the  trustees  or  managers  of 
such  partnership,  association  or  trust  shall  file 
with  the  tax  commissioner,  in  such  form  as  he 
shall  determine,  its  agreement  to  pay  to  the 
commonwealth  annually  the  tax  imposed  by 

95  the  preceding  paragraph  and  any  tax  imposed 
by  section  five  of  this  act.  In  case  of  any  breach 
of  the  terms  of  any  such  agreement,  the  same 
may  be  enforced  by  information  in  equity  to  be 
brought  by  the  attorney-general  at  the  relation 

100  of  the  tax  commissioner  in  the  supreme  judicial 
court  for  the  county  of  SufiFolk.  This  remedy 
shall  be  in  addition  to  all  other  means  of  collec- 
tion provided  by  this  act,  and  to  the  penalties 
hereinafter  imposed. 

105  For  the  purposes  of  this  act  any  securities  of 
the  classes  designated  in  this  section,  held  in 
pledge,  or  on  margin  or  otherwise,  by  an  agent 
or  broker  as  security  for  a  debt  of  his  principal, 
whether  such  securities  stand  in  the  name  of 

110  the  principal  or  of  any  other  person,  shall  be 
deemed  to  be  the  property  of  the  principal,  and 
the  income  arising  therefrom  shall  be  included 
in  the  total  income  of  the  principal  under  this 
section. 

1 15  No  distribution  of  capital,  whether  in  hquida- 
tion  or  otherwise,  shall  be  taxable  as  income 
under  this  section;  but  accumulated  profits 
shall  not  be  regarded  as  capital  under  this 
provision. 

DEDUCTIONS   ALLOWED 

Section  3.  From  the  income  taxable  under 
section  two  of  this  act  the  taxpayer  may,  under 
the  conditions  prescribed  in  this  section  and  in 
section  seven,  receive  a  deduction  on  account  of 
5  interest  paid  by  him  during  the  year  on  debts 
of  the  following  classes: 

(a)  Debts,  except  those  secured  by  mortgage 
or  pledge  of  real  estate  or  tangible  personal 
property,  owed  by  persons  engaged  in  the  busi- 
10  ness  of  buying,  selling,  or  otherwise  dealing  in 
intangible  personal  property,  provided  that 
such  business,  if  it  includes  other  classes  of  deal- 
ings, does  not  include  buying,  selling,  improving 
or  otherwise  dealing  in  or  with  real  estate  or 
15  buying,  selling,  manufacturing  or  otherwise 
dealing  in  or  with  tangible  personal  property. 

(6)  Debts  owed  by  other  persons,   except 

debts  secured  by  such  mortgage  or  pledge  and 

debts  on  account  of  which  the  taxpayer  is  en- 

20  titled  to  claim  a  deduction  under  sections  five 

and  six. 

In  determining  as  hereinafter  provided  the 


34  THE  MASSACHUSETTS 

deduction  authorized  in  the  preceding  para- 
graph, no  deduction  shall  be  allowed  in  respect 

25  of  interest  upon  any  debt  belonging  to  either 
class  (a)  or  class  (b)  above  enumerated  which 
arises  from  loans  or  open  accounts  directly  or  in- 
directly secured  by  intangible  personal  property, 
except  to  an  amount  not  exceeding  eighty  per 

80  cent  of  the  income  returned  by  the  taxpayer 
for  taxation  under  section  two  on  account  of 
intangible  personal  property  which  secured 
such  loans  or  open  accounts. 

The  said  deduction  shall  be  determined  in 

35  the  following  manner : 

A  taxpayer  who  claims  the  benefit  of  the  said 
deduction  shall  file  with  the  tax  commissioner 
or  the  income  tax  assessor  of  his  district  a  re- 
turn, in  such  form  as  the  tax  commissioner  shall 

40  from  time  to  time  prescribe,  of  his  entire  in- 
come from  all  sources,  together  with  such  other 
information  as  the  tax  commissioner  may  deem 
necessary  for  the  determination  of  the  an^ount 
of  said  deduction.    The  tax  commissioner  may, 

45  in  lieu  of  such  return,  accept  a  sworn  duplicate 
of  the  annual  return  of  income  made  under  the 
provisions  of  the  act  of  congress  of  the  United 
States,  approved  October  third,  nineteen  hun- 
dred and  thirteen,   and  acts  in  amendment 

60  thereof  and  in  addition  thereto;  he  may  also, 
in  any  case  where  he  shall  deem  it  necessary, 
require  the  taxpayer  to  file  such  a  sworn 
duphcate. 

From  the  said  return  and  information  the  tax 

55  commissioner  or  the  income  tax  assessor  shall 
determine  the  amount  of  interest  paid  during 
the  year  by  the  taxpayer  on  debts  of  classes  (a) 
or  (6)  above  enumerated,  for  which  deduction 
is  authorized  by  this  section,  which  interest  for 

60  the  purpose  of  this  section  shall  be  called  the  net 
interest.  He  shall  also  determine  the  total  net 
income  of  the  taxpayer,  exclusive  of  income  tax- 
able under  section  five,  as  such  total  net  income 
would  be  if  no  deduction  were  made  for  interest 

65  paid  during  the  year.  The  taxpayer  may  de- 
duct from  his  income  taxable  under  section  two 
an  amount  of  interest  paid  by  him  during  the 
year  which  shall  bear  the  same  proportion  to 
the  net  interest  paid  as  his  income  taxable  under 

70  section  two  bears  to  his  total  net  income  as 
above  determined. 

A  partnership,  association  or  trust,  the  bene- 
ficial interest  in  which  is  represented  by  trans- 
ferable shares,  paying  to  the  commonwealth  a 

75  tax  upon  income  subject  to  taxation  under  sec- 
tion two  of  this  act,  as  provided  in  said  section, 
may  receive  the  deduction  authorized  by  this 


INCOME  TAX  LAW  35 

section  on  the  same  terms  as  an  individual 
inhabitant. 

80  Any  person  filing  a  fraudulent  return  or 
giving  fraudulent  information  to  the  tax  com- 
missioner or  the  income  tax  assessor  under  this 
section,  shall  be  subject  to  the  penalties  set 
forth  in  section  thirteen  of  this  act  in  the  case 

85  of  fraudulent  returns. 

EXEMPTION 

Section  4.  A  person  whose  total  income 
from  all  sources  does  not  exceed  six  hundred 
dollars  during  the  year  preceding  that  in  which 
the  tax  is  assessed  shall  have  an  exemption  of 
6  three  hundred  dollars  of  that  part  of  his  income 
which  is  liable  to  taxation  under  section  two  of 
this  act. 

INCOME   FROM   ANNUITIES,    PROFESSIONS, 
EMPLOYMENTS,    TRADE   AND   BUSINESS 

Section  5.  Income  of  the  following  classes 
received  by  any  inhabitant  of  this  common- 
wealth, during  the  calendar  year  prior  to  the  as- 
sessment of  the  tax,  shall  be  taxed  as  follows : 
5  (a)  Income  from  an  annuity  shall  be  taxed 
at  the  rate  of  one  and  one  half  per  cent  per 
annum.  The  income  of  property  held  in  trust 
shall  not  be  exempted  from  taxation  under 
section  two  nor  shall  payments  to  beneficiaries 

10  be  taxed  under  this  section,  because  of  the  fact 
that  the  whole  or  any  part  of  the  payments  to 
the  beneficiaries  is  in  the  form  of  an  annuity.  A 
person  whose  total  income  from  all  sources  does 
not  exceed  six  hundred  dollars  during  the  year 

15  preceding  that  in  which  the  tax  is  assessed  shall 
have  an  exemption  of  three  hundred  dollars  of 
that  part  of  his  income  which  is  hable  to  taxa- 
tion under  this  paragraph;  provided,  however, 
that  no  person  shall  have  exemptions  under 

20  this  paragraph  and  under  section  four  exceed- 
ing in  all  three  hundred  dollars  of  income. 

(6)  The  excess  over  two  thousand  dollars  of 
the  income,  as  defined  in  section  six,  derived 
from  professions,  employments,  trade  or  busi- 

25  ness  shall  be  taxed  at  the  rate  of  one  and  one 
half  per  cent  per  annum.  In  determining  such 
income  the  rental  value  of  hving  quarters  fur- 
nished any  individual  as  part  of  his  compensa- 
tion shall  be  included.    The  wages  and  salaries 

80  of  employees  and  officers  of  the  United  States 
government  shall  not  be  taxed;  but  if  such  em- 
ployees and  oflficers  receive  other  income  tax- 
able under  this  section,  that  part  of  such  other 


36  THE  MASSACHUSETTS 

income  shall  be  taxed  which,  when  such  other 

85  income  is  added  to  the  amount  of  the  wages  or 
salary  received  as  an  employee  or  officer  of  the 
United  States  government,  shall  be  in  excess  of 
two  thousand  dollars. 

(c)  The  excess  of  the  gains  over  the  losses 

40  received  by  the  taxpayer  from  purchases  or 
sales  of  intangible  personal  property,  whether 
or  not  the  said  taxpayer  is  engaged  in  the  busi- 
ness of  dealing  in  such  property,  shall  be  taxed 
at  the  rate  of  three  per  cent  per  annum;  pro- 

45  videdy  that  in  the  case  of  intangible  personal 
property  held  by  trustees  or  other  fiduciaries, 
the  said  excess  shall  be  determined  and  the  tax 
imposed  by  this  section  shall  be  assessed  by  the 
tax  commissioner  or  income  tax  assessor  and 

60  the  tax  shall  be  paid,  at  the  time  when  such 
trust  is  terminated,  but  such  trustee  or  other 
fiduciary  may  at  his  option  include  the'  said 
excess  in  any  return  of  income  made  prior  to 
the  termination  of  the  trust,  and  the  tax  shall 

55  be  assessed  and  paid  as  of  the  year  in  which  the 
return  is  made.  In  the  case  of  trusts  that  con- 
tinue for  more  than  five  years,  the  said  excess, 
if  not  previously  returned,  shall  be  included  in  a 
return  of  taxable  income  at  least  in  every  fifth 

60  year,  and  the  tax  shall  be  assessed  and  paid  as 
of  the  year  in  which  the  return  is  made.  Any 
such  trustee  or  other  fiduciary  may  charge  any 
taxes  paid  under  this  paragraph  against  princi- 
pal in  any  accounting  which  he  makes  as  such 

65  trustee. 

Income  of  the  classes  enumerated  in  para- 
graphs (a),  (6)  and  (c)  of  this  section  received 
by  any  partnership,  association  or  trust,  the 
beneficial  interests  in  which  are  represented  by 

70  transferable  shares,  shall  be  taxed  under  this 
section  to  the  same  extent  as  if  the  partnership, 
association  or  trust  were  an  individual  inhab- 
itant of  this  commonwealth,  imless  the  divi- 
dends on  the  transferable  shares  issued  by  such 

75  partnership,  association  or  trust  are  taxable 
under  the  provisions  of  section  two. 

Interest  and  dividends  taxable  under  section 
two  of  this  act  shall  not  be  taxed  under  this 
section;  and  income  derived  from  property  not 

80  subject  to  taxation  under  chapter  four  hundred 
and  ninety  of  the  acts  of  the  year  nineteen  hun- 
dred and  nine  and  acts  in  amendment  thereof 
and  in  addition  thereto,  and  also  income  de- 
rived from  forest  lands  classified  under  chapter 

85  five  hundred  and  ninety-eight  of  the  acts  of  the 
year  nineteen  hundred  and  fourteen,  shall  not 
be  taxed  under  this  act. 


INCOME  TAX  LAW  37 

DETERAONATION  OF  TAXABLE  INCOME  FROM  PRO- 
FESSION,   EMPLOYMENT,    TRADE    OR   BUSINESS 

Section  6.  Income  taxable  under  para- 
graph (6)  of  section  five  of  this  act  shall  be  the 
gross  income  from  the  profession,  employment, 
trade  or  business,  including  gains  from  the  sale 
5  of  capital  assets,  other  than  intangible  personal 
property,  employed  therein,  less  the  following 
deductions : 

(a)  Expenses  paid  within  the  year  in  the  pro- 
fession, employment,  trade  or  business,  includ- 

10  ing  the  cost  of  ordinary  repairs  but  not  includ- 
ing personal  or  family  expenses;  provided,  that 
premiums  paid  for  use  and  occupancy  insur- 
ance, or  rent  insurance,  shall  not  be  deducted 
as  part  of  such  expenses. 

15  (&)  A  reasonable  allowance  for  the  deprecia- 
tion and  obsolescence  of  property  within  the 
year,  and  for  the  depletion  within  the  year  of 
wasting  assets  owned  by  the  person  taxed  and 
used  in  the  profession,  employment,  trade  or 

20  business;  provided,  that  with  the  approval  of 
the  tax  commissioner  a  taxpayer  may,  in  lieu  of 
the  aforesaid  allowance  for  depreciation  and 
obsolescence,  be  allowed  to  deduct  actual  ex- 
penses of  replacement  of  capital  and  extraordi- 

25  nary  repairs,  and  with  such  approval  may  in 
any  year  defer  such  deductions  in  whole  or  in 
part  to  one  or  more  subsequent  years. 

(c)  All  taxes  paid  within  the  year  to  the 
United  States  or  any  other  nation,  or  to  any 

80  state,  county,  city,  town  or  district,  in  respect 
of  the  profession,  employment,  trade  or  busi- 
ness, or  the  property  held  or  used  in  connection 
therewith,  but  not  including  assessments  for 
betterments. 

35  (d)  Interest  paid  within  the  year  on  indebted- 
ness of  the  person  taxed  incurred  in  connection 
with  his  profession,  employment,  trade  or  busi- 
ness; but  no  interest  allowed  as  a  deduction 
under  section  three  of  this  act  shall  also  be  al- 
io lowed  under  this  section. 

(e)  Losses  from  the  sale  within  the  year  of 
capital  assets  other  than  intangible  personal 
property  and  losses  sustained  within  the  year 
by  fire,  theft  or  other  casualty,  or  amounts  paid 

45  within  the  year  on  account  of  claims  in  tort  or 
contract  incurred  in  connection  with  the  pro- 
fession, employment,  trade  or  business,  when 
not  compensated  for  by  insurance  or  otherwise. 
(J)  The    amount    of   any    debts    receivable 

50  arising  from  the  conduct  of  a  profession,  em- 
ployment, trade  or  business  subsequent  to 
December  thirty-first,  nineteen  hundred  and 


38  THE  MASSACHUSETTS 

fifteen,  determined  by  the  person  taxed  to  be 
worthless  and  actually  charged  off  during  the 
55  year;  but  no  debts  receivable  as  income  shall 
be  so  charged  off  and  deducted,  unless  they 
have  previously  been  included  as  income  in  a 
return  made  under  this  act. 

(g)  An  amount  equal  to  five  per  cent  of  the 
60  assessed  value  of  the  stock  in  trade  and  other 
tangible  property,  real  and  personal,  owned  by 
the  person  taxed  and  used  or  employed  in  the 
profession,    employment,    trade    or    business 
within  or  without  the  commonwealth,  on  the 
65  day  as  of  which  such  property  is  assessed  in  the 
year  for  which  the  income  is  computed.     In 
case  any  such  stock  in  trade  or  other  tangible 
property  located  without  the  commonwealth  is 
taxed  in  respect  of  its  income,  and  not  in  respect 
70  of  its  capital  value,  by  the  taxing  district  in 
which  it  is  located  in  such  year,  the  tax  com- 
missioner may  determine  its  value  in  any  other 
manner,   and  may  allow  a  deduction  of  ^n 
amount  equal  to  five  per  cent  of  the  value  so 
75  determined. 

(h)  The  sum  of  five  hundred  dollars  for  a 
husband  or  wife  with  whom  the  taxpayer  lives, 
and  the  sum  of  two  hundred  and  fifty  dollars 
for  each  child  under  the  age  of  eighteen  years, 
80  or  parent  entirely  dependent  for  support  upon 
the  person  making  the  return.  The  aforesaid 
deduction  shall  not  be  made  by  both  husband 
and  wife,  but  may  be  made  by  either  as  they 
shall  mutually  agree,  or  shall  be  prorated  be- 
85  tween  them  in  proportion  to  the  net  income  of 
each  in  excess  of  two  thousand  dollars.  In  no 
case  shall  the  total  deduction  on  account  of 
husband  and  wife,  and  children  and  parents, 
exceed  one  thousand  dollars. 
90  (i)  Income  of  the  classes  specified  in  the  last 
paragraph  of  section  five. 

METHODS   OF   DETERMINING   TAXABLE   INCOME 

Section  7.  Persons  who  customarily  esti- 
mate their  income  and  expenditure  on  a  basis 
other  than  that  of  actual  cash  receipts  and  dis- 
bursements may,  with  the  approval  of  the  tax 

5  commissioner,  compute  upon  a  similar  basis 
their  income  taxable  under  this  act.  In  de- 
termining the  gains  or  losses  realized  from  the 
sale  of  capital  assets,  the  value  on  January  first, 
nineteen  hundred  and  sixteen,  of  such  property 

10  owned  on  that  date  shall  be  the  basis  of  de- 
termination, and  in  case  property  is  acquired 
after  January  first,  nineteen  hundred  and  six- 
teen, the  value  on  the  date  that  it  is  acquired 
shall  be  the  basis  of  determination. 


INCOME  TAX  LAW  39 


ESTATES  OF  DECEASED  PERSONS 

Section  8.  The  income  received  by  persons 
since  deceased  shall  be  taxed  to  their  estates. 
The  income  received  by  estates  of  deceased 
persons  who  last  dwelt  in  this  commonwealth 
5  shall  be  subject  to  the  taxes  assessed  by  this 
act,  to  the  extent  that  the  persons  to  whom  such 
income  is  payable  or  for  whose  benefit  it  is  ac- 
cumulated are  inhabitants  of  this  common- 
wealth, which  shall  be  assessed  to  the  executor 

10  or  administrator,  and  before  the  appointment  of 
an  executor  or  an  administrator  such  taxes  shall 
be  assessed  in  general  terms  to  the  estate  of  the 
deceased,  and  the  executor  or  administrator 
subsequently  appointed  shall  be  liable  for  the 

15  tax  so  assessed  as  though  assessed  to  him: 
provided,  that  no  person  shall  be  taxed  under  the 
provisions  of  this  act  for  income  received  from 
any  executor  or  administrator  which  income 
has  itself  been  taxed  under  the  provisions  of 

20  this  section;  and  provided,  that  an  executor 
or  administrator  who  has  given  due  notice  of 
his  appointment,  and  who  has  filed  an  inventory 
within  nine  months  thereafter,  shall  not  be 
obliged  to  pay  any  tax  hereunder  except  upon 

25  income  received  by  him  or  income  of  his  de- 
cedent with  respect  to  which  he  is  required  to 
make  a  return  hereunder,  unless  the  same  shall 
be  assessed  within  one  year  after  his  giving 
bond  for  the  performance  of  his  trust.    K  the 

80  inventory  shall  not  have  been  filed  within  the 
said  nine  months,  the  executor  or  administrator 
shall  be  obUged  to  pay  any  taxes  that  may  be 
assessed  hereunder  within  three  months  after 
the  filing  of  the  inventory. 

85  The  provisions  of  this  act  with  reference  to 
the  taxation  of  income  received  by  trustees 
shall,  so  far  as  apt,  and  except  as  otherwise 
provided  herein,  apply  to  the  income  received 
by  executors  and  administrators. 


PROPERTY   HELD   IN   TRUST 

Section  9.  The  income  received  by  estates 
held  in  trust  by  trustees,  any  one  of  whom  is 
an  inhabitant  of  this  commonwealth  or  has 
derived  his  appointment  from  a  court  of  this 

5  commonwealth,  shall  be  subject  to  the  taxes 
assessed  by  this  act  to  the  extent  that  the  per- 
sons to  whom  the  income  from  the  trust  is  pay- 
able, or  for  whose  benefit  it  is  accumulated,  are 
inhabitants  of  this  commonwealth.    The  tax 

10  shall  be  assessed  to  such  of  the  trustees  as  are 
inhabitants  of  the  commonwealth. 


40  THE  MASSACHUSETTS 

Such  part  of  the  income  of  intangible  per- 
sonal property  held  in  trust  as  is  payable  to  or 
accumulated  for  persons  who  are  not  inhabit- 

15  ants  of  the  commonwealth,  shall  be  exempt 
from  the  taxes  imposed  by  this  act. 

If  an  inhabitant  of  this  commonwealth  re- 
ceives income  from  one  or  more  executors,  ad- 
ministrators or  trustees,  none  of  whom  is  an 

20  inhabitant  of  this  commonwealth  or  has 
derived  his  appointment  from  a  court  of  this 
commonwealth,  such  income  shall  be  subject  to 
the  taxes  assessed  by  this  act,  according  to  the 
nature  of  the  income  received  by  the  executors, 

i5  administrators  or  trustees. 

An  executor,  administrator,  or  trustee  may, 
at  the  request  of  any  beneficiary,  claim  the 
benefit  of  the  exemptions  provided  by  sections 
four  and  five  of  this  act  for  each  person  to  whom 

80  the  income  from  the  trust  is  payable,  or  for 
whose  benefit  it  is  accumulated,  and  an  inhabit- 
ant of  this  commonwealth  receiving  incotne 
from  one  or  more  executors,  administrators  or 
trustees,  none  of  whom  is  an  inhabitant  of  this 

35  commonwealth,  or  has  derived  his  appointment 
from  a  court  of  this  commonwealth,  may  also 
claim  the  benefit  of  such  exemptions;  provided, 
however,  that  no  such  exemptions  shall  be  al- 
lowed unless  the  tax  commissioner  is  satisfied 

40  by  an  aflBdavit  from  the  beneficiary  who  claims 
exemptions,  or  for  whose  benefit  the  same  are 
claimed,  or  otherwise,  that  such  beneficiary  is 
not  allowed  in  all  trusts  or  estates  under  which 
he  may  be  a  beneficiary,  and  on  account  of  all 

45  income  on  which  he  is  liable  to  taxation  under 
this  act,  more  than  the  total  amount  of  exemp- 
tions to  which  he  is  entitled  under  said  sections 
four  and  five  respectively. 

Corporations  authorized  under  the  laws  of 

60  this  commonwealth  to  act  as  trustee  or  in  any 
other  fiduciary  capacity  shall,  with  respect  to 
the  income  received  by  them  in  that  capacity, 
be  subject  to  the  provisions  of  this  act  in  the 
same  manner  and  under  the  same  conditions  as 

55  individual  inhabitants  of  this  commonwealth 
acting  in  similar  capacities,  except  that  no  such 
corporation  shall  be  taxed  on  account  of  any 
property  the  income  of  which  would  be  taxable 
under  section  two  hereof  if  received  by  an  in- 

60  dividual  inhabitant,  or  on  account  of  the  income 
derived  from  such  property,  if  such  property 
is  held  by  such  corporation  as  mortgagee  or 
pledgee  to  secure  the  payment  of  bonds,  notes 
or  other  evidences  of  indebtedness  the  interest 

65  on  which  is  taxable  under  section  two  of  this 
act  to  such  individual  inhabitants  of  the  com- 


INCOME  TAX  LAW  41 

monwealth  as  receive  it,  or  the  principal  of 
which  is  exempt  from  taxation  under  laws  other 
than  this  act. 

70  The  provisions  of  this  act  with  reference  to 
the  taxation  of  income  received  by  trustees 
shall,  so  far  as  apt,  apply  to  the  income  received 
by  guardians,  conservators,  trustees  in  bank- 
ruptcy, receivers  and  assignees  for  the  benefit 

75  of  creditors.  Income  accumulated  in  trust  for 
the  benefit  of  unborn  or  unascertained  persons 
or  persons  with  contingent  interests  shall  be 
taxed  as  if  accumulated  for  the  benefit  of  in- 
habitants of  this  commonwealth. 

80  For  the  purpose  of  facilitating  the  settlement 
and  distribution  of  estates  held  by  executors, 
administrators,  trustees,  guardians,  conserva- 
tors, trustees  in  bankruptcy,  receivers  and  as- 
signees for  the  benefit  of  creditors,  the  tax  com- 

85  missioner,  with  the  approval  of  the  attorney- 
general,  may  on  behalf  of  the  commonwealth 
agree  upon  the  amount  of  taxes  at  any  time  due 
or  to  become  due  from  such  estates  under  the 
provisions  of  this  act,  and  payment  in  accord- 

90  ance  with  such  agreement  shall  be  full  satisfac- 
tion of  the  taxes  to  which  the  agreement 
relates. 

PARTNERSHIPS 

Section  10.  Profits  or  income,  of  the  classes 
hereinbefore  made  taxable,  of  partnerships  of 
which  any  member  is  an  inhabitant  of  this 
commonwealth  and  which  have  a  usual  place 
5  of  business  in  this  commonwealth,  shall  be  sub- 
ject to  the  taxes  assessed  by  this  act.  If  any  of 
the  members  of  the  partnership  are  not  inhabit- 
ants of  this  commonwealth,  only  so  much  of 
the  income  thereof  as  is  proportionate  to  the 

10  aggregate  interest  of  the  partners  who  are  in- 
habitants of  this  commonwealth  in  the  profits 
of  the  partnership  shall  be  taxed.  The  tax 
shall  be  assessed  on  such  a  partnership  by  the 
name  under  which  it  does  business,  and  the 

15  partners  shall  not  be  taxed  with  respect  to  the 
income  derived  by  them  from  such  a  partner- 
ship. A  partnership  may,  except  as  hereinafter 
provided,  in  computing  the  amount  of  income 
with  respect  to  which  it  is  taxable,  deduct  at 

20  the  request  of  any  partner  the  whole  or  any  part 
of  the  amount  of  any  exemption  to  which  such 
partner  may  be  entitled  under  the  provisions  of 
sections  four  and  five  of  this  act;  provided^ 
however,  that  no  such  exemption  shall  be  allowed 

25  unless  the  tax  commissioner  is  satisfied  by  an 
affidavit  from  the  partner  for  whose  benefit  an 
exemption  is  claimed,  or  otherwise,  that  such 


42  THE  MASSACHUSETTS 

partner  is  not  allowed,  in  all  partnerships  in 
which  he  may  be  a  partner,  and  on  account  of 

80  all  income  on  which  he  is  liable  to  taxation 
under  this  act,  more  than  the  total  amount  of 
exemptions  to  which  he  is  entitled  under  said 
sections  four  and  five  of  this  act.  Each  amount 
so  deducted  shall  be  set  forth  in  the  return  of 

85  such  partnership,  and  the  partner  requesting 
the  same  shall  be  allowed  no  further  exemption 
on  account  of  the  amount  so  deducted  by  the 
partnership. 

An  inhabitant  of  this  commonwealth  who  is 

40  a  member  of  a  partnership  having  no  usual 
place  of  business  in  this  commonwealth,  who 
receives  income  from  such  partnership  derived 
from  such  a  source  that  it  would  be  taxable  if 
received  directly  by  such  partner,  shall  as  to 

45  such  income  be  subject  to  the  taxes  imposed 
by  this  act. 

The  provisions  of  this  act  in  respect  to  the 
filing  of  returns,  and  the  assessment,  abatement 
and  collection  of  taxes,  and  to  notices  concern- 

50  ing  the  same,  shall  apply  to  partnerships  sub- 
ject to  taxation  hereunder. 

This  section  shall  not  apply  to  partnerships, 
associations  or  trusts,  the  beneficial  interest 
in  which  is  represented  by  transferable  shares, 

55  and  nothing  in  this  section  shall  aflfect  other 
provisions  of  this  act  so  far  as  the  same  relate 
to  such  partnerships,  associations  or  trusts,  the 
beneficial  interest  in  which  is  represented  by 
transferable  shares. 

EXEMPTION   OF   PROPERTY   THE   INCOME   OF 
WHICH   IS   TAXED 

Section  11.  After  the  year  nineteen  hun- 
dred and  sixteen,  income  which  is  taxable  under 
the  provisions  of  section  five  of  this  act,  and, 
except  as  provided  in  section  twenty-one, 
5  property,  whether  held  by  an  executor,  adminis- 
trator, trustee  or  otherwise,  the  income  of 
which,  if  any,  is  taxed  or  would  be  taxable 
under  the  provisions  of  section  two  of  this  act 
if  received  by  an  inhabitant  of  this  common- 

10  wealth,  shall  be  exempt  from  taxation  under 
the  provisions  of  chapter  four  hundred  and 
ninety  of  the  acts  of  the  year  nineteen  hundred 
and  nine  and  acts  in  amendment  thereof  and  in 
addition    thereto;  provided,    however,    that    in 

15  determining  the  amount  of  any  tax  upon  a  cor- 
porate franchise  under  the  pro\'isions  of  Part  III 
of  said  chapter  four  hundred  and  ninety,  the 
value  of  securities  the  income  of  which,  if  any, 
is  taxed  or  would  be  taxable  under  the  provi- 


INCOME  TAX  LAW  43 

20  sions  of  this  act  if  owned  by  a  natural  person, 
shall  not  be  included  in  the  deduction,  author- 
ized by  section  forty-one  of  said  part  of  said 
chapter,  of  securities  which,  if  owned  by  a 
natural  person  resident  in  this  commonwealth, 

25  would  not  be  liable  to  taxation,  but,  for  the 
purposes  of  section  forty-three  of  said  part  of 
said  chapter,  shall  be  included  among  securities 
which,  if  owned  by  a  natural  person  resident  in 
this  commonwealth,  would  be  liable  to  taxation. 

SO  This  act  shall  not  be  construed  to  impose  a  tax 
upon  any  corporation  or  person  in  respect  to 
income  derived  from  property  exempted  from 
taxation  by  provisions  of  law  existing  prior  to 
the  passage  of  this  act,  nor  shall  anything  in 

35  this  act  exempt  from  taxation,  under  the  provi- 
sions of  said  chapter  four  hundred  and  ninety, 
real  estate  and  tangible  personal  property. 

Except  as  provided  in  section  nine,  the  in- 
come received  by  corporations  shall  not  be  tax- 

40  able  under  the  provisions  of  this  act.  Every 
corporation  liable  to  taxation  under  said  section 
nine  shall  make  the  returns  required  by  this 
act,  and  shall  be  subject  to  the  penalties  therein 
provided. 


Section  12.  Every  individual  inhabitant  of 
the  commonwealth,  including  every  partner- 
ship, association  or  trust,  whose  annual  income 
from  all  sources  exceeds  two  thousand  dollars 
6  shall  annually  make  a  return  of  his  entire  in- 
come, except  income  derived  (a)  from  real 
estate,  (6)  from  dividends  exempt  from  taxa- 
tion under  section  two  of  this  act,  (c)  from  in- 
terest upon  bonds  or  other  obligations  of  the 

10  United  States,  (d)  from  interest  upon  such 
bonds,  notes  and  certificates  of  indebtedness 
of  the  commonwealth  and  political  subdivisions 
thereof  as  are  exempt  from  taxation  under  the 
provisions  of  clause  fifteen  of  section  five  of 

15  Part  I  of  chapter  four  hundred  and  ninety  of 
the  acts  of  the  year  nineteen  hundred  and  nine, 
and  acts  in  amendment  thereof  and  in  addition 
thereto,  (e)  from  loans  secured  exclusively  by 
mortgages  of  real  estate,  taxable  as  real  estate, 

20  situated  within  the  commonwealth  to  an 
amount  not  exceeding  the  assessed  value  of  the 
mortgaged  real  estate,  and  (/)  from  wages  or 
salaries  received  from  the  United  States.  Every 
other  individual  inhabitant,   including  every 

25  partnership,  association  or  trust,  who  receives 
income  taxable  under  section  two  or  subdivision 
(a)  or  (c)  of  section  five  of  this  act  shall  make 
an  annual  return  of  such  taxable  income. 


44  THE  MASSACHUSETTS 

Every  executor,  administrator,  trustee,  guar- 
30  dian,  conservator,  trustee  in  bankruptcy,  as- 
signee for  the  benefit  of  creditors  and  receiver, 
other  than  a  receiver  of  a  corporation  organized 
under  the  laws  of  the  commonwealth,  and  every 
other  person  receiving  income  taxable  under 
85  this  act  shall  make  an  annual  return  of  his 
taxable  income  as  herein  provided. 

The  aforesaid  return  shall  be  under  oath,  and 
shall  be  filed  with  the  income  tax  assessor  for 
the  district  in  which  the  taxpayer  resides  or  has 
40  his  principal  place  of  business  or,  at  the  option 
of  the  taxpayer,  may  be  filed  with  the  tax  com- 
missioner, and  shall  be  made  in  such  form  as 
the  tax  commissioner  shall  from  time  to  time 
prescribe  and  shall  contain  such  further  infor- 

45  mation  as  the  tax  commissioner  may  deem 
pertinent.  The  return  shall  be  made  on  or 
before  the  first  day  of  March  in  each  year,  and 
shall  relate  to  the  income  received  durihg  the 
calendar  year  ending  on  the  preceding  thirty- 

50  first  day  of  December. 

The  return  required  by  this  section  shall  be 
filed  by  every  person  who  is  at  any  time  be- 
tween the  first  day  of  January  and  the  thirtieth 
day  of  June  in  any  year  an  inhabitant  of  the 

55  commonwealth,  if  such  person  has  in  the  pre- 
ceding year  received  income  taxable  hereunder: 
provided,  that  the  return  relating  to  income 
taxable  under  the  provisions  of  this  act,  and 
received  by  any  person  who  shall  have  deceased 

60  without  having  made  a  return  relating  to  such 
income,  shall  be  made  by  his  executor  or  admin- 
istrator; and  provided,  that  in  the  case  of  any 
such  person  who  has  become  an  inhabitant  of 
the  commonwealth  after  the  first  day  of  Feb- 

65  niary  in  any  year,  such  return  shall  be  due  and 
shall  be  filed  ninety  days  after  he  becomes  such 
an  inhabitant.  Every  person  who  is  an  inhabit- 
ant of  the  commonwealth  at  any  time  between 
the  first  day  of  January  and  the  thirtieth  day 

70  of  June,  both  inclusive,  in  any  year,  shall  be 
subject  to  the  taxes  imposed  by  this  act. 

The  tax  commissioner  shall  cause  to  be  pre- 
pared blanks  for  the  said  returns,  and  shall 
cause  them  to  be  distributed  throughout  the 

75  commonwealth;  but  no  person  shall  be  excused 
from  making  the  return  by  failure  of  the  tax 
commissioner  to  send  or  give  one  of  the 
blanks  to  him. 

The  tax  commissioner  shall  give  seasonable 

80  notice  of  the  requirement  of  this  section,  in  the 
manner  prescribed  by  section  forty-one  of 
Part  I  of  chapter  four  hundred  and  ninety  of 
the  acts  of  the  year  nineteen  hundred  and  nine, 


INCOME  TAX  LAW  45 

not  later  than  the  fifteenth  day  of  January  in 

85  each  year,  in  every  city  and  town  in  the  com- 
monwealth. 

If  the  tax  commissioner  shall,  from  informa- 
tion derived  from  the  return  or  otherwise,  be  of 
opinion  that  any  person  whose  income  is  tax- 

90  able  under  the  provisions  of  this  act  may  have 
failed  to  file  a  return,  or  to  include  in  a  return 
filed,  either  intentionally  or  through  error,  all 
the  sources  of  his  taxable  income,  he  may  re- 
quire from  such  person  a  return  or  a  supple- 

95  mentary  return  under  oath,  in  such  form  in  each 
individual  instance  as  the  commissioner  shall 
prescribe,  of  all  the  sources  from  which  the  tax- 
payer received  any  income,  whether  or  not 
taxable  under  the  provisions  of  this  act,  in  the 

100  year  for  which  the  return  was  made.  If  from  a 
supplementary  return  or  otherwise  the  commis- 
sioner finds  that  any  sources  of  taxable  income 
have  been  omitted  from  the  original  return,  he 
may  require  the  amount  of  income  from  each 

105  source  of  taxable  income  so  omitted  to  be  dis- 
closed to  him  under  oath  of  the  person  liable 
for  the  tax,  and  added  to  the  original  return. 
Such  supplementary  return  and  the  correction 
of  the  original  return  shall  not  relieve   the 

110  person  making  the  same  from  any  of  the 
penalties  to  which  he  may  be  liable  under  any 
provision  of  this  act.  The  tax  commissioner 
may  proceed  under  the  provisions  of  section 
fourteen  of  this  act,  whether  or  not  he  requires 

115  a  return  or  a  supplementary  return  under  this 
section. 

PENALTIES 

Section  13.  If  any  person  required  to  file  a 
return  under  the  provisions  of  this  act  fails  to 
file  the  return  within  the  time  prescribed  by 
such  provisions,  there  shall  be  added  to,  and 
5  become  a  part  of  the  tax,  as  an  additional  tax, 
the  sum  of  five  dollars  for  every  day  during 
which  such  person  is  in  default;  provided^  how- 
ever, that  the  tax  commissioner  may,  in  his  dis- 
cretion, abate  any  such  additional  tax  in  whole 

10  or  in  part. 

If  any  person  fails  to  file  a  return  required 
under  the  provisions  of  this  act  on  or  before  the 
first  day  of  May  of  any  year,  any  justice  of  the 
supreme  judicial  court  or  of  the  superior  court, 

15  upon  petition  of  the  tax  commissioner  or  of  the 
income  tax  assessor  for  the  district  in  which 
such  person  is  required  to  file  the  return,  or  of 
any  ten  taxable  inhabitants  of  the  common- 
wealth, shall  issue  a  writ  of  mandamus  requiring 

20  such  person  to  file  the  return.     The  order  of 


46  THE  MASSACHUSETTS 

notice  upon  the  petition  shall  be  returnable  not 
later  than  ten  days  after  the  filing  of  the  peti- 
tion. The  petition  shall  be  heard  and  deter- 
mined on  the  return  day  or  on  such  day  there- 

25  after  as  the  court  shall  fix,  having  regard  to  the 
speediest  possible  determination  of  the  cause 
consistent  with  the  rights  of  the  parties.  The 
judgment  shall  include  costs  in  favor  of  the 
prevailing  party.    All  writs  and  processes  may 

SO  be  issued  from  the  clerk's  office  in  any  county, 
and,  except  as  aforesaid,  shall  be  returnable  as 
the  court  shall  order. 

If  any  person  files  a  fraudulent  return,  or  if 
any  person  who  has  failed  to  file  a  return,  or  has 

35  filed  an  incorrect  or  insufficient  return,  and  has 
been  notified  by  the  tax  commissioner  of  his 
delinquency,  without  reasonable  excuse  fails 
to  file  a  return  within  twenty  days  after  re- 
ceiving such  notice,  such  person  shall  be  pun- 

40  ished  by  a  fine  of  not  less  than  one  hundred 
dollars  nor  more  than  ten  thousand  dollars,  or 
by  imprisonment  for  not  more  than  one  year, 
or  by  both  such  fine  and  imprisonment,  and 
shall  forfeit  his  right  to  hold  pubHc  office  any- 

45  where  within  the  commonwealth  for  such 
period,  not  exceeding  five  years,  as  the  court 
may  determine. 

In  the  case  of  a  partnership  of  which  one  or 
more  members  are  inhabitants  of  this  common- 

50  wealth  and  having  a  usual  place  of  business  in 
this  commonwealth,  the  penalties  imposed  by 
this  act  may  be  inflicted  upon  any  member  of 
the  partnership  who  is  an  inhabitant  of  this 
commonwealth  and  who  has  any  active  part  in 

65  the  management  of  the  affairs  of  the  partner- 
ship, and  if  there  is  no  such  member,  upon  the 
person  or  persons  in  charge  of  its  affairs  within 
this  commonwealth.  In  the  case  of  a  partner- 
ship, association  or  trust,  the  beneficial  interests 

60  in  which  are  represented  by  transferable  shares, 
the  penalties  imposed  by  this  act  for  failure  to 
file  a  return  may  be  inflicted  upon  the  trustees, 
managers  or  officers  whose  duty  it  was  to  make 
the  return. 

65  The  penalties  provided  by  this  section  shall 
apply  to  individuals  and  corporations  acting  in 
any  fiduciary  capacity.  In  the  case  of  a  corpo- 
ration, the  penalty  may  be  imposed  on  the 
corporation,  on  the  officers  whose  duty  it  was 

70  to  make  the  return,  or  on  both. 

ASSESSMENT   AND   ADMINISTRATION 

Section  14.    The  tax  commissioner  shall  de- 
termine from  the  returns  required  by  this  act, 


INCOME  TAX  LAW  47 

or  in  any  other  manner,  the  income  of  every 
person  taxable  under  this  act,  and  shall  assess 

5  thereon  the  tax  hereby  provided;  but  he  shall 
not  determine  the  income  of  a  person  who  has 
filed  a  return  in  accordance  with  section  twelve, 
within  the  time  prescribed  by  law,  to  be  in  ex- 
cess of  that  disclosed  by  such  return,  without 

10  notifying  such  person  and  giving  him  an  op- 
portunity to  explain  the  apparent  incorrect- 
ness of  his  return. 

For  the  purpose  of  verifying  any  return  made 
pursuant  to  this  act  the  tax  commissioner  may, 

15  within  two  years  after  the  date  when  such  re- 
turn was  due,  if  he  has  reason  to  believe  the 
return  to  be  fraudulent  or  incorrect,  direct  by 
special  authorization  a  deputy  or  other  agent 
to  verify  the  return;   and  for  the  purpose  of 

20  such  verification  the  books  and  papers  of  the 
person  shall  be  open  to  the  examining  officer, 
or  shall  be  produced  for  the  purpose  upon  a 
summons,  which  the  tax  commissioner,  or  the 
examining  officer,  is  hereby  authorized  to  issue. 

25  The  person  making  the  return  may  be  examined 
by  such  officer  under  oath. 

If  no  return,  or  a  fraudulent,  incorrect  or 
insufficient  return,  has  been  filed  by  a  person 
required  to  file  a  return  under  the  provisions  of 

80  this  act,  and  the  person  so  in  default  refuses  or 
neglects,  after  notice,  to  file  a  proper  return, 
the  tax  commissioner  shall  determine  the  in- 
come of  such  person,  taxable  under  this  act, 
according  to  his  best  information  and  belief,  and 

35  shall  assess  the  same  at  double  the  amount  so 
determined.  In  the  case  of  sickness,  absence 
or  other  disability  of  a  person  liable  to  the  tax, 
the  tax  commissioner  may  allow  such  further 
time  for  filing  the  return  as  he  may  deem  neces- 

40  sary. 

If  the  tax  commissioner  discovers  from  the 
verification  of  a  return  filed  under  this  act,  or 
otherwise,  that  the  income  of  any  person  sub- 
ject to  taxation  under  this  act,  or  any  portion 

45  thereof,  has  not  been  assessed,  he  may,  at 
any  time  within  two  years  after  first  day  of 
September  of  the  year  in  which  such  assess- 
ment should  have  been  made,  assess  the  same, 
first  giving  notice  to  the  person  so  to  be  assessed 

50  of  his  intention,  and  such  person  shall  there- 
upon have  an  opportunity  within  ten  days  after 
such  notification  to  confer  with  the  tax  com- 
missioner in  person  or  by  counsel  or  other  rep- 
resentative  as   to  the   proposed   assessment. 

65  After  the  expiration  of  ten  days  from  such 
notification  the  tax  commissioner  shall  assess 
the  income  of  such  person  subject  to  taxation. 


48  THE  MASSACHUSETTS 

or  any  portion  thereof,  which  he  believes  has 
not  theretofore  been  assessed,   and  he  shall 

60  thereupon  give  notice  to  the  person  so  assessed 
under  the  provisions  of  section  fifteen  of  this  act, 
and  the  tax  shall  be  payable  fourteen  days 
after  the  date  of  such  notice.  The  provisions 
of  this  act  in  respect  to  the  abatement  and  col- 

65  lection  of  taxes  shall  apply  to  a  tax  so  assessed. 
The  tax  commissioner  may  from  time  to 
time  make  such  rules  and  regulations,  not  in- 
consistent with  the  provisions  of  this  act,  as 
he  may  deem  necessary  for  the  purpose  of  carry- 

70  ing  out  its  provisions. 

Section  15.  The  tax  commissioner  shall,  on 
or  before  the  first  day  of  September  in  each 
year,  give  notice  to  every  person  taxable  under 
the  provisions  of  this  act  of  the  amount  of  the 

5  tax  payable  by  him,  and  of  the  date  upon 
which  the  tax  is  due  and  payable,  which  date 
shall  be  the  fifteenth  day  of  October.  The 
notice  shall  be  a  written  or  printed  notice, 
and   shall   be    mailed,    postage   prepaid,    ad- 

10  dressed  to  the  person  assessed  at  his  place 
of  residence  or  business,  or  at  the  address 
given  in  his  return,  or  otherwise  delivered 
at  such  place  of  residence  or  business  or  at 
such  address.     All  taxes  assessed  hereunder 

15  may  be  paid  at  the  oflfice  of  the  tax  commis- 
sioner in  Boston  or  at  the  oflBce  of  the  income 
tax  assessor  for  the  district  in  which  the  tax- 
payer resides  or  has  his  principal  place  of  busi- 
ness, at  the  option  of  the  taxpayer,  and  the 

20  notice  shall  state  the  places  at  which  the  tax 
may  be  paid. 

Failure  to  receive  the  notice  provided  for  by 
this  section  shall  not  affect  the  validity  of  the 
tax. 

Section  16.  Returns  shall  be  open  to  the  in- 
spection of  the  tax  commissioner  and  of  his 
deputies,  assistants  and  clerks,  when  acting 
under  his  authority,  and  of  the  income  tax  as- 

6  sessors  and  of  their  deputies,  assistants  and 
clerks,  when  acting  under  their  authority.  The 
disclosure  by  the  tax  commisioner,  or  by  any 
deputy,  assistant,  clerk  or  assessor,  or  other  em- 
ployee of  the  commonwealth,  or  of  any  city  or 

10  town  therein,  to  any  person  of  any  information 
whatever  contained  in  or  set  forth  by  any  such 
return,  other  than  the  name  and  address  of  the 
person  filing  it,  except  in  proceedings  to  collect 
the  tax  or  by  proper  judicial  order,  shall  be 

15  punishable  by  a  fine  not  exceeding  one  thousand 
dollars,  or  by  imprisonment  for  a  period  not 


INCOME  TAX  LAW  49 

exceeding  six  months,  or  by  both  such  fine  and 
imprisonment,  and  by  disqualification  from 
holding  oflBce  for  such  period,  not  exceeding 

20  three  years,  as  the  court  may  determine.  Said 
returns  shall  be  preserved  for  two  years,  and 
thereafter  until  the  tax  commissioner  orders 
them  to  be  destroyed. 

Lists  or  indexes  of  persons  in  the  district  who 

25  have  filed  returns  shall  be  kept  in  the  olBSce  of 
each  income  tax  assessor,  and  shall  be  open  to 
public  inspection.  The  name  of  each  person 
filing  a  return  shall  be  placed  on  such  list  or 
index  immediately  on  the  fifing  of  the  return. 

Section  17.  For  the  purpose  of  carrying  out 
the  provisions  of  this  act,  the  tax  commissioner 
shall  divide  the  commonwealth  into  income  tax 
districts,  and  he  may  from  time  to  time  change 
6  the  limits  of  the  districts.  He  shall,  with  the 
advice  and  consent  of  the  governor  and  council, 
appoint,  and  may  with  their  consent  remove,  an 
income  tax  assessor  for  each  district,  to  assist 
him  in  such  manner  and  under  such  rules  and 

10  regulations  as  he  may  from  time  to  time  pre- 
scribe in  the  performance  of  his  duties  here- 
under. 

An  income  tax  assessor  need  not  be  a  resident 
of  the  district  in  which  he  is  to  serve:  provided, 

15  that,  so  far  as  practicable  preference  shall  be 
given  to  residents  of  the  respective  districts. 
The  commissioner  may  transfer  any  income  tax 
assessor  from  one  district  to  another,  and  may 
assign  any  such  assessor  to  temporary  or  ex- 

20  traordinary  service  in  any  district. 

The  tax  commissioner  may  also  appoint  such 
deputy  income  tax  assessors,  who  may  be  mem- 
bers of  boards  of  assessors  of  cities  or  towns, 
and  such  clerical  and  other  assistants  in  the 

25  several  districts,  as  may,  in  the  opinion  of  the 
governor  and  council,  be  necessary  for  the 
proper  performance  of  his  duties. 

The  salaries  of  the  income  tax  assessors  and 
their  deputies  shall  be  fixed  by  the  tax  com- 

30  missioner  with  the  approval  of  the  governor 
and  council,  and  the  income  tax  assessors,  their 
deputies,  assistants  and  clerks,  shall  be  allowed 
such  reasonable  and  necessary  traveling  and 
other  expenses  incurred  in  the  performance  of 

85  their  duties  as  may  be  approved  by  the  tax 

commissioner  and  by  the  governor  and  council. 

All  taxes  received  by  the  income  tax  assessors 

shall  be  accounted  for  and  turned  over  to  the 

tax  commissioner  as  often  as  once  in  each  week, 

40  and  the  commissioner  shall  transmit  to  the 
treasurer  and  receiver-general  as  often  as  once 


50  THE  MASSACHUSETTS 

in  each  month  all  taxes  received  by  him  under 
the  provisions  of  this  act. 

The  tax  commissioner  shall  require  the  in- 

45  come  tax  assessors  to  give  bonds  in  such  form, 
with  such  sureties  and  in  such  amounts  as  may 
be  approved  by  the  governor  and  council,  and 
all  premiums  upon  such  bonds  shall  be  paid  by 
the  tax  commissioner  out  of  moneys  appropri- 

50  ated  for  the  purposes  of  this  act. 

The  tax  commissioner  may  also,  with  the 
advice  and  consent  of  the  governor  and  council, 
appoint,  and  with  their  consent  remove,  a 
deputy  to  be  known  as  the  income  tax  deputy, 

55  who  shall  receive  such  salary  as  the  governor 
and  council  may  approve,  and  who,  under  the 
direction  of  the  tax  commissioner,  shaU  have 
supervision  and  control  of  the  assessment  and 
collection  of  the  income  taxes  provided  for 

60  by  this  act;  and  the  tax  commissioner  shall 
appoint  such  additional  clerical  and  other  as- 
sistants to  the  income  tax  deputy  and  income 
tax  assessors  as  the  governor  and  council  may 
approve. 

65  The  aforesaid  income  tax  deputy,  income  tax 
assessors  and  deputy  assessors  shall  have  such 
duties  and  powers  consistent  with  the  provi- 
sions of  this  act  as  the  tax  commissioner  shall 
from  time  to  time  prescribe.     Their  appoint- 

70  ment  shall  be  governed  by  the  provisions  of 
law  relative  to  the  appointment  of  the  present 
deputies  and  assistants  of  the  tax  commissioner, 
and  supervisors  of  assesors. 

Section  18.  If  a  tax  assessed  under  the  pro- 
visions of  this  act  is  not  paid  at  the  time  when  it  is 
due,  interest  at  the  rate  of  six  per  cent  per  annum 
from  that  time  shall  be  added  to  and  become 
5  part  of  the  tax.  The  tax  commissioner,  and  the 
income  tax  assessors  in  their  respective  districts, 
shall  have  all  the  remedies  for  the  collection  of 
taxes  assessed  under  the  provisions  of  this  act 
that  are  provided  by  chapter  four  hundred  and 

10  ninety  of  the  acts  of  the  year  nineteen  hundred 
and  nine,  and  acts  in  amendment  thereof  and 
in  addition  thereto,  for  the  collection  of  taxes 
on  personal  estate  by  collectors  of  taxes  of 
cities  and  towns,  and  shall  be  allowed  charges 

15  and  fees  as  therein  provided.  Any  action  of 
contract  brought  to  recover  any  such  tax  shall 
be  brought  in  the  name  of  the  commonwealth. 

ABATEMENTS 

Section  19.    Any  person  aggrieved  by  the 
of  a  tax  under  the  provisions  of  this 


INCOME  TAX  LAW  51 

act  may  apply  to  the  tax  commissioner  for  an 
abatement  thereof  at  any  time  within  three 
5  months  after  the  date  of  the  notice  of  the  assess- 
ment; and  if,  after  a  hearing,  the  tax  commis- 
sioner is  satisfied  that  the  tax  is  excessive  in 
amount  or  that  the  person  assessed  is  not  sub- 
ject to  the  tax,  he  shall  abate  the  tax  in  whole  or 

10  in  part  accordingly;  and  if  the  tax  has  been 
paid,  the  treasurer  and  receiver-general  shall 
repay  to  the  person  assessed  the  amount  of 
such  abatement,  with  interest  thereon  at  the 
rate  of  six  per  cent  per  annum  from  the  time 

15  when  it  was  paid :  provided,  however,  that  no  tax 
assessed  upon  any  person  liable  to  taxation 
imder  this  act  shall  be  abated  in  any  event  unless 
the  person  assessed  shall  have  filed,  at  or  before 
the  time  of  bringing  his  petition  for  abatement, 

20  a  return  as  required  by  section  twelve  of  this 
act;  and  if  he  failed  without  good  cause  to  file 
his  return  within  the  time  prescribed  by  law,  or 
filed  a  fraudulent  return,  or,  having  filed  an  in- 
correct or  insufficient  return,  has  failed,  after 

25  notice,  to  file  a  proper  return,  the  tax  commis- 
sioner shall  not  abate  the  tax  below  double  the 
amount  for  which  the  person  assessed  was 
properly  taxable  under  the  provisions  of  this 
act.     The  tax  commissioner  shall  notify  the 

SO  petitioner  by  registered  letter  of  his  decision 
upon  the  petition. 

Any  person  aggrieved  by  the  refusal  of  the 
tax  commissioner  to  abate,  in  whole  or  in  part, 
under  the  provisions  of  this  section,  a  tax  as- 

35  sessed  under  the  provisions  of  this  act,  may, 
within  thirty  days  after  receiving  notice  of  the 
decision  of  the  tax  commissioner,  appeal  there- 
from by  filing  a  complaint  with  the  clerk  of  the 
board  of  appeal  provided  for  by  section  sixty- 

40  eight  of  Part  III  of  chapter  four  hundred  and 
ninety  of  the  acts  of  the  year  nineteen  hundred 
and  nine.  If,  upon  a  hearing,  the  board  of  ap- 
peal finds  that  the  person  making  the  appeal 
is  entitled  to  any  abatement  from  the  tax  as- 

45  sessed  upon  him,  it  shall  make  such  abatement 
as  it  sees  fit. 

The  decision  of  the  board  of  appeal  shall  be 
final  and  conclusive,  and  shall  be  communicated 
in  writing  to  the  petitioner  and  the  tax  com- 

50  missioner  within  five  days  after  the  decision  of 
the  board. 

If  the  tax  appealed  from  has  been  paid,  the 
treasiu-er  and  receiver-general  shall  repay  to  the 
petitioner  the  amount  of  any  abatement  and 

55  interest  from  the  time  of  payment,  upon  pres- 
entation to  him  by  the  petitioner  of  the  notice 
of  the  decision  of  the  board. 


52  THE  MASSACHUSETTS 

Section  20.  Any  person  aggrieved  by  the 
refusal  of  the  tax  commissioner  to  abate  in 
whole  or  in  part,  under  the  provisions  of  the 
preceding  section,  a  tax  assessed  under  the  pro- 

5  visions  of  this  act  may,  instead  of  pursuing  the 
remedy  provided  in  the  preceding  section,  ap- 
peal from  such  refusal  by  iBling  a  complaint 
against  the  tax  commissioner  in  the  superior 
court  for  the  county  in  which  such  person  re- 

10  sides  or  has  his  principal  place  of  business, 
within  thirty  days  after  the  notice  by  the  tax 
commissioner  of  his  decision  in  accordance  with 
the  preceding  section.  An  order  of  notice  shall 
be  issued  by  said  court  and  served  upon  the  tax 

15  commissioner  within  such  time  as  the  court 
shall  direct,  and  the  subsequent  proceedings 
shall  be  conducted  in  accordance  with  the  pro- 
visions of  sections  seventy-seven  to  eighty,  in- 
clusive, of  Part  I  of  chapter  four  hundred  and 

20  ninety  of  the  acts  of  the  year  nineteen  hundred 
and  nine,  and  acts  in  amendment  thereof  and 
in  addition  thereto;  but  if  the  complainant  was 
subject  to  taxation  under  this  act  and  did  not 
file  his  return  within  the  time  prescribed  by  law 

25  he  shall  not  be  entitled  to  have  any  part  of  his 
tax  abated  by  the  court,  unless  the  court  finds 
that  he  had  good  cause  for  his  delay,  or  the  tax 
commissioner  had  previously  so  found.  If  an 
abatement  is  granted,  the  amount  thereof  shall 

30  be  repaid  to  the  complainant  by  the  treasurer 
and  receiver-general,  with  interest  at  the  rate 
of  six  per  cent  per  annum  from  the  time  when 
the  tax  was  paid,  and  costs. 

The  remedies  provided  by  sections  nineteen 

35  and  twenty  hereof  shall  be  exclusive,  whether 
or  not  the  tax  is  wholly  illegal. 

ADDITIONAL   LOCAL   TAXES 

Section  21.  All  property  owned  by  a  resi- 
dent of  this  commonwealth  on  the  first  day  of 
April  in  any  year,  which  during  the  preceding 
calendar  year  had  produced  for  such  owner  any 

5  income  taxable  under  this  act,  shall,  despite 
anything  in  this  act,  be  subject  to  taxation  to 
such  owner  in  accordance  with  the  provisions 
of  chapter  four  hundred  and  ninety  of  the  acts 
of  the  year  nineteen  hundred  and  nine,  and  acts 

10  in  amendment  thereof  and  in  addition  thereto, 
if  such  owner  does  not  make  to  the  tax  com- 
missioner a  full  return  of  his  taxable  income 
from  such  property  on  or  before  the  first  day  of 
September  of  the  year  in  which  a  return  of  in- 

15  come  is  required  by  section  twelve  of  this  act, 
and  provided  the  tax  so  assessed  is  greater  than 


INCOME  TAX  LAW  53 

the  amount  of  the  tax  properly  payable  under 
sections  two  and  fourteen  of  this  act.  Property 
taxable  in  any  year  under  this  section  shall  be 

20  assessed  in  that  year  between  the  second  day 
of  September  and  the  tenth  day  of  December, 
both  inclusive.  The  amount  of  taxes  assessed 
by  the  local  assessors  upon  such  property  in 
such  city  or  town  in  any  year,  less  the  amount 

25  assessed  and  collected  by  the  tax  commissioner 
as  hereinafter  provided,  shall  be  entered  on  the 
tax  list  of  the  collector  of  such  city  or  town,  and 
he  shall  collect  and  pay  over  the  same  to  the 
city  or  town. 

30  Any  taxpayer  aggrieved  by  the  assessment  of 
a  tax  under  the  provisions  of  this  section  may 
appeal  to  the  tax  commissioner  within  thirty 
days  after  the  receipt  of  the  tax  bill  therefor, 
or  other  actual  notice  of  the  assessment.     In 

35  case  of  an  adverse  determination  by  the  tax 
commissioner,  the  taxpayer  may  appeal  to 
the  board  of  appeal  as  provided  in  section 
nineteen,  or  to  the  superior  court  as  provided  in 
section   twenty;     and   if   the   taxpayer    shall 

40  establish  that  the  income  of  the  property  was 
duly  returned  or  that  it  was  not  taxable  or  that 
there  was  reasonable  excuse  for  not  making 
the  return,  the  tax  shall  be  abated,  and  if  it 
has  previously  been  paid,  the  amount  abated 

45  shall  be  repaid  by  the  city  or  town  to  the  tax- 
payer, with  interest  from  the  time  of  such  pay- 
ment. At  any  time  prior  to  the  collection  by 
the  city  or  town  of  the  tax  provided  for  by  this 
section,  the  tax  commissioner  may  assess  and 

50  collect  the  tax  provided  for  by  the  act,  on  the 
income  of  the  property  subject  to  the  limitation 
of  time  provided  by  section  fourteen.  Upon 
the  collection  of  the  tax,  the  tax  commis- 
sioner shall  at  once  notify  the  tax  collector  of 

55  the  city  or  town  in  which  the  taxpayer  resides, 
and  the  tax  collected  by  him  shall  be  deducted 
from  the  tax  assessed  in  that  city  or  town;  and 
if  the  tax  assessed  in  such  city  or  town  has  been 
collected,  the  amount  so  deducted  shall  be  re- 

60  paid  by  the  city  or  town  to  the  taxpayer.  If  a 
tax  collected  by  a  city  or  town  under  the  pro- 
visions of  this  section  is  afterward  abated,  the 
amount  of  the  abatement,  together  with  the 
amount  of  any  interest  paid  by  the  taxpayer 

65  on  that  amount,  shall  be  paid  by  the  city  or 
town  to  the  taxpayer. 

Upon  discovery  of  property  the  income  of 
which  for  the  preceding  calendar  year,  taxable 
under  this  act,  has  not  been  returned  on  or  be- 

70  fore  the  first  day  of  September  of  the  year  in 
which  the  return  is  required,  the  tax  commis- 


54  THE  IMASSACHUSETTS 

sioner  shall  forthwith  notify  the  assessors  of  the 
city  or  town  in  which  the  property  is  taxable, 
unless  there  is  within  his  knowledge  a  reasonable 
75  excuse  for  the  failure  of  the  taxpayer  to  file  the 
return.  Upon  making  any  assessment  under 
the  provisions  of  this  section,  the  assessors 
shall  forthwith  notify  the  tax  commissioner. 

Section  22.  Any  taxpayer  who  in  the  year 
nineteen  hundred  and  seventeen  fails  to  bring  in 
a  list  of  taxable  personal  estate,  as  provided  in 
sections  forty-one  to  forty-nine  inclusive  of  Part 
6  I  of  chapter  four  hundred  and  ninety  of  the  acts 
of  the  year  nineteen  hundred  and  nine,  and  acts 
in  amendment  thereof  and  in  addition  thereto, 
shall  be  assessed  in  that  year  for  an  amount  of 
personal  estate  not  less  tJian  that  for  which  he 

10  was  assessed  and  taxed  in  the  year  nineteen 
hundred  and  sixteen.  The  tax  commissioner 
shall  have  authority  to  assess  any  taxpayer  in 
any  city  or  town  for  any  amount  of  tax  for 
which  said  taxpayer  may  be  hable  imder  the 

15  provisions  of  this  section;  and  any  assessor 
who  shall  violate  the  provisions  of  this  section 
shall  be  Uable  to  the  penalties  imposed  by  sec- 
tion thirty-nine  of  Part  I  of  chapter  four  hun- 
dred and  ninety  of  the  acts  of  the  year  nineteen 

20  hundred  and  nine,  and  acts  in  amendment 
thereof  and  in  addition  thereto. 


DISTRIBUTION 

Section  23.  On  or  before  the  fifteenth  day 
of  November  in  the  year  nineteen  hundred  and 
seventeen  the  treasurer  and  receiver-general 
shall  pay  to  each  city  or  town  an  amount  equal 

6  to  the  difference  between  the  amount  of  the  tax 
levied  upon  personal  property  in  such  city  or 
town  in  the  year  nineteen  hundred  and  fifteen 
and  the  amount,  computed  by  the  tax  commis- 
sioner, that  would  be  produced  by  a  tax  upon 

10  the  personal  property  actually  assessed  in  such 
city  or  town  for  the  year  nineteen  hundred  and 
seventeen  at  the  same  rate  of  taxation  as  pre- 
vailed therein  in  the  year  nineteen  hundred  and 
fifteen.    If  the  amount  of  taxes  collected  from 

15  incomes  shall  exceed  the  sum  necessary  to  make 
such  payments,  the  balance  shall  be  distributed 
among  the  several  cities  and  towns  in  propor- 
tion to  the  amount  of  the  state  tax  imposed 
upon  each  of  them  in  the  year  nineteen  hundred 

iO  and  seventeen;  provided,  that  of  the  aforesaid 
excess  the  commonwealth  shall  retain  a  sum 
sufficient  to  reimburse  it  for  the  expenses  in- 
curred under  this  act  during  the  year  nineteen 


INCOME  TAX  LAW  55 

hundred  and  seventeen,  and  abated  taxes  re- 
t5  paid  hereunder  during  said  year.  In  years 
subsequent  to  nineteen  hundred  and  seventeen, 
the  taxes  collected  under  this  act  shall  be  dis- 
tributed as  the  general  court  may  determine. 

Section  24.  On  or  before  the  first  day  of 
August  in  each  year  the  tax  commissioner  shall, 
upon  the  basis  of  the  information  then  in  his 
possession,  notify  the  assessors  of  each  city 
5  and  town  of  the  amount  of  income  tax  such 
city  or  town  is  to  receive  under  this  act.  The 
said  assessors,  in  determining  the  rate  of  taxa- 
tion to  be  levied  upon  taxable  property  for  the 
year,  shall  include  in  the  estimated  receipts 
10  lawfully  applicable  to  the  payment  of  expendi- 
tures the  aforesaid  amount  of  income  tax. 

INFORMATION   AT   THE   SOURCE 

Section  25.  Every  individual,  partnership, 
association,  trust  or  corporation,  being  an  in- 
habitant of  the  commonwealth  or  having  a 
place  of  business  therein,  shall  file  annually 
5  with  the  tax  commissioner  a  return  in  such  form 
as  the  tax  commissioner  shall  from  time  to  time 
prescribe,  giving  the  names  and  addresses  of  all 
regular  employees  residing  in  this  common- 
wealth to  whom  the  said  individual,  partner- 

10  ship,  association,  trust  or  corporation  has  paid 
wages,  salary  or  other  compensation  in  excess 
of  the  sum  of  eighteen  hundred  dollars  during 
the  previous  calendar  year. 

Every  corporation  and  every  partnership, 

15  association  or  trust  the  beneficial  interest  in 
which  is  represented  by  transferable  shares, 
doing  business  in  the  commonwealth,  shall,  un- 
less the  dividends  paid  upon  its  shares  are  ex- 
empt from  taxation  under  section  two  of  this 

20  act,  on  or  before  the  first  day  of  March  in  the 
year  nineteen  hundred  and  seventeen  and  in 
each  year  thereafter,  file  with  the  tax  commis- 
sioner a  list  of  the  names  and  addresses  of  its 
shareholders  as  of  record  on  the  thirty-first  day 

25  of  December  of  the  previous  year,  or,  in  its 
discretion,  of  such  shareholders  as  are  residents 
of  the  commonwealth;  provided,  however,  that 
the  tax  commissioner  in  his  discretion  may 
accept  in  lieu  of  the  above  list  from  any  cor- 

30  poration,  partnership,  association  or  trust  re- 
quired to  make  a  return  hereunder  a  list  of  its 
shareholders  as  of  record  on  any  other  date 
satisfactory  to  him.  Every  such  corporation, 
partnership,  association  or  trust  shall  also  re- 

35  port  to  the  tax  commissioner  on  or  before  the 


56  THE  MASSACHUSETTS 

first  day  of  March  in  each  year  the  names  and 
addresses  of  residents  of  the  commonwealth  to 
whom  it  has  paid  interest  during  the  preceding 
calendar  year  upon  its  bonds,  notes,  or  other 

40  evidences  of  indebtedness,  and  to  whom  it  has 
paid  any  annuity  or  annuities,  except,  however, 
interest  coupons  payable  to  bearer,  and  income 
exempt  from  taxation  under  this  act.  In  any 
individual  case,  any  such  corporation,  partner- 

45  ship,  association  or  trust  shall,  upon  request  of 
the  tax  commissioner,  state  the  respective 
amounts  of  dividends,  interest  and  annuities 
so  paid  by  it  to  any  person  during  any  calendar 
year. 

60  The  returns  provided  by  this  section  shall  be 
made  on  or  before  the  first  day  of  March  in 
each  year;  but  the  tax  commissioner  may,  in 
his  discretion,  authorize  such  returns  to  be 
made  at  any  other  date  and  in  connection  with 

55  any  other  reports  or  returns  that  the  said  indi- 
viduals, partnerships,  associations,  trusts  and 
corporations  may  be  required  to  file  with  him. 
Any  individual,  partnership,  association, 
trust  or  corporation  that  without  reasonable 

60  excuse  fails  to  comply  with  the  provisions  of 
this  section  shall  be  punished  by  a  fine  of  not 
less  than  twenty-five  nor  more  than  five  hun- 
dred dollars  for  each  offence. 

Section  26.  The  treasurer  of  every  city, 
town  and  county,  and  the  auditor  of  the  com- 
monwealth shall,  in  each  year  not  later  than 
the  tenth  day  of  April,  in  the  form  prescribed 

5  by  the  tax  commissioner,  furnish  said  commis- 
sioner with  the  names  and  addresses  of  all  em- 
ployees of  said  cities,  towns,  coimties  and  of 
the  commonwealth  respectively  who  received 
during  the  preceding  calendar  year  as  salary, 

10  wages,  or  otherwise  amounts  exceeding  eight- 
teen  hundred  dollars  in  each  case,  together  with 
the  amount  received  by  each. 

GENERAL   PROVISIONS 

Section  27.  If  any  part,  subdivision  or  sec- 
tion of  this  act  shall  be  declared  unconstitu- 
tional, the  vahdity  of  the  remaining  parts  of 
this  act  shall  not  be  affected  thereby. 

Section  28.  No  caption  to  any  section  or 
set  of  sections  shall  in  any  way  control  or  affect 
the  interpretation  of  this  act  or  of  any  part 
thereof. 

Section  29.  After  the  passage  of  this  act  or 
the  fifteenth  day  of  May  in  the  year  nineteen 


INCOME  TAX  LAW  57 


hundred  and  sixteen,  whichever  last  occurs,  no 
bonds  shall  be  registered  under  chapter  seven 

5  hundred  and  sixty-one  of  the  acts  of  the  year 
nineteen  hundred  and  fourteen,  and  acts  in 
amendment  thereof  and  in  addition  thereto. 
The  tax  imposed  by  this  act  shall  not  be  as- 
sessed upon  the  income  from  any  bond  regis- 

10  tered  under  any  of  said  acts  until  the  term  for 
which  such  bond  was  exempted  by  registration 
has  expired. 

Section  30.    This  act  shall  take  effect  upon 
its  passage. 


Personal  Trusts 

THE  reasons  that  prompt  a 
person  to  engage  the  services 
of  specialists  in  other  lines  should 
impel  him  to  exercise  the  same 
care  in  selecting  those  who  are  to 
administer  his  estate.  The 

OLD  COLONY  TRUST 
COMPANY 

offers  you  the  services  of  an  effi- 
cient trust  department,  experi- 
enced specialists  in  all  matters 
relating  to  trusts,  specialists  in 
investing  trust  funds,  and  the 
security  of  a  strong  and  respon- 
sible company. 

Capital $6,000,000 

Surplus.     .....     6,000,000 

Stockholders'  Liability   6,000,000 

Under  the  new  income  tax  law 
all  trustees  and  executors  are  re- 
quired to  make  proper  sworn  re- 
turns of  their  income  taxable  under 
the  act.  At  the  same  time  the  tax 
is  at  a  reasonable  rate,  so  that 
trustees  can  pay  the  tax  and  still 
obtain  a  satisfactory  net  return 
for  their  beneficiaries  from  con- 
servative taxable  securities.  This 
change  in  the  law  revolutionizes 
the  investment  of  trust  estates. 

The  officers  of  the  Old  Colony 
Trust  Company  are  always  glad 
to  explain  the  many  advantages 
that  can  be  obtained  through  the 
employment  of  this  company  in 
any  of  its  fiduciary  capacities. 

Trust  Department 
17    COURT    STREET,    BOSTON 


Your  Estate 

YOUR  estate  is  now  receiving 
the  benefit  of  your  manage- 
ment, care,  and  thought,  and  you 
should  determine  wlho  is  best 
equipped  to  manage  it  after  your 
death.  THE  CONTROLLING  FAC- 
TORS to  be  considered  IN  CHOOS- 
ING AN  EXECUTOR  AND  TRUSTEE 
ARE  HIS  FINANCIAL  STANDING, 
EXPERIENCE,  and  JUDGMENT. 
In  appointing  the  OLD  COLONY 
TRUST  COMPANY  Executor  of 
your  will  you  secure 

THE  SERVICES  OF  A  STRONG 
FINANCIAL  INSTITUTION, 

THE  EXPERIENCED  JUDGMENT 
OF  AN  ORGANIZATION  WHOSE 
BUSINESS  IS  SETTLING  ESTATES, 

THE  CONFIDENCE  THAT  YOUR 
ESTATE  WILL  BE  FAITHFULLY 
ADMINISTERED,  and 

THE  SYSTEMATIC,  EFFICIENT 
MANAGEMENT  OF  SPECIALISTS. 

The  settling  of  estates  is  the  work 
of  the  specialist,  and  you  must 
choose  the  executor  wisely  in  order 
to  secure  the  greatest  benefit  for 
those  who  are  to  enjoy  your  prop- 
erty and  for  whom  it  must  be 
conserved. 

TODAY  YOU  WOULD  NOT  CON- 
SIDER EMPLOYING  ANYONE 
OTHER  THAN  A  SPECIALIST  TO 
MANAGE  YOUR  BUSINESS 
AFFAIRS. 

YOU  SHOULD  SECURE  A  SPECIAL- 
IST WHEN  HE  IS  MOST  NEEDED, 
THAT  IS,  IN  THE  SETTLEMENT 
OF  YOUR  ESTATE. 

NAME  THE 
EXECUTOR  UNDER  YOUR  WILL 


To  Trustees 
and  Other  Investors 

THE  new  Income  Tax 
Law  has  been  laid  be- 
fore you  in  the  preceding 
pages.  Income  You  are 
Now  Receiving"  from  tax- 
able securities  is  subject 
to  this  tax. 

In  place  of  low  yield 
tax-exempt  bonds,  you 
may  now  buy  well-secured 
taxable  municipal,  rail- 
road, and  other  corpora- 
tion bonds  which  will  net 
you,  tax  paid,  from  4  per 
cent  to  5  per  cent. 

Instead  of  being  limited 
practically  to  the  purchase 
of  non-taxable  stocks  in 
your  desire  for  a  fair  yield, 
you  may  now  obtain  a 
reasonable  return  with 
the  security  afforded  by 
high-grade  mortgage 
bonds. 

It  will  be  to  your  advan- 
tage to  consult  our  Bond 
Department  if  you  con- 
template changes  in  or 
additions  to  your  invest- 
ments at  the  present  time. 

A  copy  of  our  invest- 
ment circular  will  be  sent 
on  request. 

Bond  Department 


Directors 


GORDON  ABBOTT,  Chainnan  of  Board. 
FRANCIS  R.  HART,  Vice-chairman. 
PiULIP  STOCKTON,  President. 

CHARLES  F.  ADAMS,  Treasurer  of  Harvard  College. 

F.   LOTHROP  AMES,    Director    American    Agricultural    Chemical 
Company. 

OLIVER  AMES,  Vice-President  and  Treasurer  Oliver  Ames  &  Sons 
Corporation. 

V/ILLIAM  AMORY,  Treasurer  Pepperell  Manufacltiring  Company. 

DANIEL  F.  APPEL,   Vice-President    New    England    Mutual    Life 
Insurance  Compaiky. 

CHARLES  F.  AYER,  Director  New  England   Telephone  and  Tele- 
graph Company. 

JOHN   S.  BARTLETT,  President  Lynn  Gas  and  Electric  Company. 

SAMUEL  CARR,  Trustee  The  Ames  Estate. 

Hon.  T.   JEFFERSON  COOLIDGE. 

CHARLES  E.  COTTING,  Trustee. 

ALVAH   CROCKER,  Treasurer  Crocker,  Burbank  &  Co.,  Paper  Man- 
ufacturers. 

THOMA*:   K.   CUMMINS,  Treasurer  Edison  Electric  Illuminating 
Company. 

PHILIP   y.  DE  NORMANDIE,  Bliss,  Fabyan  &  Company, 

PHILIP  DEXTER,  Chairman  Executive  Committee,  Massachusetts 
Electric  Companies. 

GEORGE  A.  DRAPER,  Treasurer  of  the  Draper  Company. 

FREDERIC  C.  DUMAINE,    Treasurer    Amoskeag    Manufacturing 
Company. 

WILMOT  R.  EVANS,  President  Boston  Five  Cents  Savings  Bank. 

FREDERICK  P.   FISH,  Fish,  Richardson,  Herrick  &  Neave. 

W.  CAMERON   FORBES,  J.  M.  Forbes  &  Company. 

REGINALD   FOSTER,  Foster  &  Turner. 

GEORGE  P.  GARDNER,  Executive  Committee    General  Electric 
Company. 

EDWIN  FARNHAM   GREENE,  Treasurer  Pacific  Mills. 

ROBERT  F.  HERRICK,  Fish,  Richardson,  Herrick  &  Neave. 

HENRY   S.  HOWE,  Lawrence  &  Company. 

WALTER   HUNNEWELL,  Director  Calumet  &  Hecla  Mining  Co. 

HENRY  C.   JACKSON,  Vice-President  Home  Savings  Bank. 

GEORGE   E.   KEITH,  George  E.  Keith  Company,  Shoe  Manufac- 
turers. 

Col.  THOMAS  L.  LIVERMORE. 

ARTHUR  LYMAN,  Director  Waltham  Watch  Company. 

Hon.  GEORGE  vcn  L.  MEYER. 

LAURENCE  MINOT,  Trustee. 

MAXWELL  NORMAN,  Trustee. 

Hon.  RICHARD   OLNEY. 

ROBERT  T.  PAINE,  2d,   Executive   Committee,   General  Electric 
Company. 

HENRY  PARKMAN,  Treasurer  Provident  Institution  for  Savings. 

ANDREW  W.  PRESTON,  President  United  Fruit  Company. 

RICHARD   S.  RUSSELL,  William  A.  Russell  &  Brother. 

HERBERT   M.  SEARS,  Trustee  Suffolk  Savings  Bank. 

HOWARD   STOCKTON,  Actuary  Massachusetts  Hospital  Life  In- 
surance Company. 

P.  F    SULLIVAN,  President  Bay  State  Street  Railway  Company. 

E.  V.  R.  THAYER,  President  Merchants  National  Bank. 

H.  O.  UNDERWOOD,  William  Underwood  Company. 

STEPHEN  M.  WELD,  Stephen  M.  Weld  &  Co.,  Cotton  Buyers. 

CHARLES  W.  WHITTIER,  C.  W.  Whittier  &  Brother,  Real  Estat*. 

SIDNEY  W.  WINSLOW,  President  United  Shoe  Machinery  Cor- 
poration. 


tltliiiil;!!!! 


O-.D^^ 


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